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Climate change 18 Aug 2016

Future alternatives for a safe business

The need, scope and nature of renewable energies are universal, but their development across different regions is uneven, and business opportunities in the sector are a battlefield where the interests of investors, engineers, ecologists, politicians and economists clash. Nobody seems to care what consumers – as both clients and citizens -  have to say, allowed only to witness the debate as confused and voiceless spectators.

Each one of the aforementioned parts is turning into a faction opposing the other sides: Plans set out by large investors do not take into account smaller entrepreneurs, independent consultants refute the studies from big corporations, renewable energy advocates collide with peers that dare to dissent. However, in vast areas of the world, essentially the United States, Latin America and in the Asian-Pacific basin, business opportunities and investments keep on growing and diversifying.

A business that travels across the world

Is everything okay or is everything wrong? Depends on who you ask and what region you look at. Mergers and acquisitions in the renewable energy industry nearly doubled over the past year in Latin America. No other region in the world experienced a similar growth rate, according to the data collected by consulting firm PricewaterhouseCoopers in its Power & Renewables Deals 2016 outlook and 2015 review, published in late February this year. According to the same report, the Asia-Pacific region posted all-time high levels, not in growth, but in terms of deal activity in the renewable business over the same period. And in 2016 the number of mergers and acquisitions is expected to continue at strong rates in the region.

In the rest of the world, the situation was also rich in opportunities, as noted by the United Nations Environmental Program in its Global Trends in Renewable Energy Investment report: “In 2015, renewable energy set new records for investment and new capacity added.” Investments reached nearly $286 billion, more than six times more than in 2004, and, for the first time, more than half of all added power generation capacity came from renewables.”

A sector with a bright future and bright business prospects: we just need to figure out where and how

The future looks bright for renewable energies, but the alarms go off around two questions: Who has the resources to play, given the high investment levels required, and which laws will govern the investments. Spain has become the paradigm of business disappointment regarding the promotion of this type of investments. In this sense, Protermosolar, the National Association of Photovoltaic Power Producers (ANPIER) and the Spanish Photovoltaic Union (UNEF) have urged the government to “guarantee equal treatment for Spanish companies and investors as the one granted to foreign investors under Energy Charter in international arbitration processes.” In the letter they addressed to Alberto Nadal, Secretary of State for Energy, the solar industry associations mention a report that Moody’s released this week, that argued that regulatory risk for EU renewables investors is greatest in Spain, a situation that will undoubtedly impact the cost of new facilities, which will bear much higher risk premiums compared to other countries.

In fact, the Spanish sector is in turmoil; Gamesa’s recent acquisition by Siemens laid bare the divergence in interests over a topic that affects everyone, and led Fernando Ferrando, Vice-president of the Renewables Foundation and former General Manager of Gamesa Energy, to lament what he described as the loss of a leading technological company. Ferrando concluded that “this outcome denies our country of the role it should be playing in the new renewable-based energy model.”

But the industry’s anger does not stop there. Pep Puig, Chair of Eurosolar, went as far as to call the Secretary of State for Energy a good disciple of Goebbels”. Alberto Nadal not only accused self-consumers of being “predatory,” but publicly stated that he considered the challenge to “reach a 100% renewable mix by 2050” ‘unattainable, technologically unfeasible.’ Leaving people aside, and more concerned about the country, José Miguel Villarig, chairman of the Association of Renewable Energy Companies (APPA), said that: “Spain has gone from being ranked the most attractive country in the world to invest in renewable energies in 2007, to being currently ranked at number 25.”

Looking beyond the frustration, there seems to be an unanimous consensus over how investment in Spain can be encouraged: according to all experts and voices coming from all sides of the political spectrum, regulatory stability is key to build confidence among investors. In the debate organized by the Renewables Foundation and El Confidencial, even Guillermo Mariscal, the ruling Popular Party’s spokesperson on energy matters, agreed that regulations need to be change, and made excuses for the current ones: “Weighted down by the tariff deficit and forced to act to prevent the system from going bankrupt, we were forced to pass a difficult and hard-hitting reform,” he explained.

At a global scale

However, the global outlook remains positive; at least for the Secretary General of the United Nations, Ban Ki Moon, who exultantly claimed that the world has “come from the impossible to the unstoppable” and admitted that the agreement on climate change was the key goal of his mandate: “Over the past nine years, I have spoken repeatedly with nearly every world leader. I have visited the climate front lines, from the Arctic to Antarctica and to the Amazon, from the Sahel to the Aral Sea."

The tone of last December’s Paris UN Climate Summit was also particularly optimistic, in contrast with previous editions.  Only ecologist delegates expressed their skepticism while the rest of attendees celebrated the final statement. Although the goal was to limit warming to 2º, the final limit agreed was 1.5º. Sources of the World Council Business for Sustainable Development consider the agreement a positive one for the business sector, “for companies, the text is very positive because it sends a very clear message for investment in the long term.”