May 14, 2019 / 11:06 PM / 5 days ago

China still most attractive renewables market despite subsidy cuts: EY

LONDON (Reuters) - China is the most attractive market for investment in renewable energy for the fourth year in a row and growth there is set to continue despite the country’s efforts to trim subsidies, a report by UK accountancy firm Ernst & Young showed on Wednesday.

FILE PHOTO: Workers inspect solar panels at a photovoltaic power station on a hill in Linyi, Shandong province, China August 11, 2018. REUTERS/Stringer/File Photo

In an annual ranking of the top 40 renewable energy markets worldwide, China was in first place, followed by the United States which was No. 2 for the second year running.

Last year, cuts to China’s expensive feed-in tariff regime slowed growth in solar installations. Solar photovoltaic (PV) capacity additions fell to 44.3 gigawatts (GW) from a record 53 GW in 2017.

These could fall further and although the government continues to support wind energy through feed-in tariffs, tariff rates are starting to decline.

At the same time, the government has proposed setting up an auction system to support renewables as it tries to move away from subsidies.

“China’s renewable energy market is undergoing a transition as the government seeks to rein in the costs of the subsidies paid to the sector,” EY said.

“With continuing concerns about pollution, falling technology costs and revived interest from international players, however, growth in the world’s largest clean energy market is set to continue,” it added. It did not give an exact prediction for growth.

France moved to third position from fifth, due to its focus on floating offshore wind capacity and more ambitious targets for onshore wind additions.

India, the world’s second most populous country after China, dropped to fourth place from third last year.

Some other countries, such as Norway and Finland, have become more attractive for renewables investment due to new projects funded by power purchase agreements (PPAs) as they move away from subsidies, the report said.

PPAs are also taking off in markets such as Taiwan, France, Spain and Australia.

For many companies, PPAs make economic sense as the contracts run for 10 years or more and offer a long-term hedge amid volatile power prices.

According to the report, PPAs supported 13.4 GW of clean energy generation last year, more than double the amount in 2017.

Reporting by Nina Chestney; Editing by Frances Kerry

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