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January 14, 2009 / Mridul

Germany Overtakes US as the Most Attractive Market for Renewable Energy Investment

According to the Ernst & Young’s latest Renewable energy country attractiveness indices, Germany has overtaken United States as the most sort after market for investment in renewable energy. The auditing firm blames the economic downturn for what has been a challenging year for renewable energy investment across the world.

The indices – which track and score global investment in renewable energy – also reveal that there has been a record reduction in the attractiveness of all 20 countries included for the first time since its creation five years ago.

Germany has been successful in attracting foreign investment due to its feed-in tariff system under which consumers can sell electricity produced from solar panels or wind turbines installed at their homes to power companies at a price higher than the market price. Although feed-in tariff has its roots in California where it was first used, the US failed to capitalize on this scheme whereas Germany mastered it so well that now other countries are adopting the same model.

While renewable energy projects kept sprouting around the world the United States, under the leadership of President Bush, failed to adopt a decisive policy for encouraging renewable energy growth. Even though the US is blessed with ample renewable energy sources, its lawmakers remained busy talking about oil while the European countries went ahead and invested heavily in wind, solar and tidal energy.

The E&Y report noted that although the government extended the Production Tax Credits and Investment Tax Credits, any positive effect they could have had was negated by the meltdown in the financial sector, their primary consumers. The report goes on to say that US is a major market and its approach to encourage renewable energy is crucial as a big portion of its renewable sources remain untapped. Pinning hopes to the Obama Presidency, the head of E&Y’s renewable energy arm says,

The path followed by the US is critical to the industry and measures announced by the impending Obama presidency will be keenly monitored. Worldwide growth of renewables is likely to continue, albeit at reduced levels, but if the US were to stall its plans there would be significant reverberations for the global industry.

With the US slowly catching up with rest of the world, its lawmakers need to make sure that new projects to tap renewable energy are set up across the country. They must realize that renewable energy requires the same amount of commitment and time that they have given in ensuring that offshore drilling for oil is restarted after a gap of 26 years. But the problem in passing a similar bill to initiate a nationwide feed-in tariff program is that the profits of the big utilities would come under pressure.

With oil scaling back to lower levels investment in renewable energy has reduced significantly.Europe has set mandatory renewable energy targets and will continue to invest in new projects although some of the projects might see delays due to economic uncertainty. Countries like Japan, Australia, Spain and Denmark are looking to expand the use of renewable energy through feed-in tariff programs and setting up new wind & solar energy projects. But as the report states, to sustain the expansion of renewable energy it is critical that United States takes some serious steps.

This article was first published on Red, Green and Blue.

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