UHY GLOBAL JANUARY 2020 FEATURE


RENEWABLE ENERGY AT THE CROSSROADS


WHETHER THE SECTOR IS SPEEDING AHEAD OR CRAWLING ALONG DEPENDS ON NATIONAL CIRCUMSTANCES – BUT OVERALL GLOBAL PROGRESS IS REAL AND SUSTAINED Renewable energy is not a fad and it is not going away. That much is clear from the latest annual Renewables Global Status Report (GSR), released by the Renewable Energy Policy Network for the 21st Century (REN21). The report reveals that more than one third of global installed power capacity is now renewable, and that over a quarter of the global electricity supply comes from renewable sources. Upwards of 11 million people around the world are employed in the renewable energy sector. While all this sounds like good news for the environment, there is a very long way to go. Many countries ‒ 169, according to the REN21 report ‒ have created renewable energy targets but far fewer have targets for the use of renewables in heating and cooling or transport, which are huge energy consumers. In fact, 60% of the total energy used in buildings in 2018 occurred “in jurisdictions that lacked energy efficiency policies,” the report states. RENEWABLE TARGETS Targets for renewable energy use differ significantly around the world: China has the world’s fastest growing renewables sector, and aims to have 30% renewable energy penetration by 2030. By 2030, Germany aims acquire 65% of its electricity from renewable sources. Russia expects to generate 2.5% of its electricity needs from renewable sources by 2024. Sweden aims to entirely eliminate fossil fuels from electricity generation by 2040. The US has a target to generate 20% of its electricity from renewables in 2020. The direction of travel for the growth of renewable energy appears to be set, even if countries are moving at different speeds. Environmental pressure plays a part, along with the actions of groups like Extinction Rebellion. But countries across the globe are also waking up to the economic potential of renewable energy. A study issued by the International Renewable Energy Agency (IRENA) calculates that doubling the share of renewables in the global energy mix by 2030 would increase global GDP by up to 1.1%, or USD 1.3 trillion, while adding 13 million new jobs in the sector. The carrot of economic growth is matched by the stick of public pressure, pushing governments into action. Some are forging ahead. In 2018 renewable energy supplied 37% of Finnish energy demand –making Finland second in the European Union for renewable energy use. Harri Laurikka, CEO of the Bioenergy Association of Finland – a client of Finnish UHY member firm UHY TietoAkseli ‒ says that Finland has to follow European legislation on climate change mitigation, but also must go further, investing in research and development in the sector and introducing a number of additional subsidies for renewable energy companies. “Overall, the public has supported public investment in renewable energy and companies operating in that business, as well as domestic energy taxes for non-renewable fuels,” he says. “Climate change has become a major concern for Finnish people, and renewable energy enhances energy security and provides jobs – often in regions where they are most needed.” Harri adds that renewables also have broad parliamentary support and that the accelerating decline of fossil fuel use is widely accepted. “It is acknowledged that the role of fossil fuels will significantly decrease in the coming decades,” he says. DEMAND AND OPPORTUNITY In countries around the world, governments are encouraging renewable energy generation, to a greater or lesser extent. In Egypt, Ahmed Hegazy, tax lead partner at UHY United in Cairo, says the government has encouraged investment in wind power by offering high prices for the generated power. “The price for the electricity generated from solar power is also very competitive, which has attracted many investors and encouraged international institutions to finance its development ‒ and that has also created many new job opportunities,” he adds. “The government is cognisant of the need for a sustainable energy mix to both address increasing demand, and to move to a more environmentally sustainable and diverse electricity sector.” UHY United already has two clients in the renewables sector, and expects to attract more as the Egyptian government works to fulfil its ambition to increase the supply of electricity from renewable sources to 20% by 2022 and 42% by 2035. These targets may look modest by Finnish standards, but ‒ like many countries in the developing world – it relies on a mix of government incentives and private and foreign investment to drive renewable energy development. DEVELOPING CAPACITY To the south, Uganda still suffers from occasional but prolonged power outages, and most of its heavily rural population relies on the burning of biomass (like wood) for energy. Reliable electricity from any source is the most pressing issue for the majority of Ugandans, with only 22% of the population enjoying access to electricity in 2018. Most of that is currently generated from hydropower. How will Uganda meet the increasing electricity demands of businesses and citizens? Dipak Lakhani, accounts and tax director at UHY Thakkar & Associates, Kampala, Uganda, points to a number of government incentives that are helping to kickstart a nascent renewables sector, in the hope that it may go some way to meeting the electricity needs of currently underserved Ugandans. Uganda is richly endowed with renewable energy sources and, says Dipak, solar and hydropower are particularly important. “The government gives tax holidays and rebates for renewable energy projects, and has also formed the Uganda Energy Credit Capitalisation Company (UECCC),” he says. “It is responsible for coordinating funding from the Ugandan government, international development partners and the private sector, to invest in the renewable energy infrastructure in Uganda.” In countries where there are more pressing social, economic or political concerns, progress towards renewable goals is predictably circumspect. But as the Ugandan example shows, progress is happening almost everywhere to some degree. Developing countries are recognising that renewable energy must play a significant role in any future energy mix, even where electricity is an unreliable resource. WHERE COAL IS STILL KING Electricity is not an unreliable resource in Australia. Indeed, the Australian government recently celebrated reaching its 2020 renewable energy target early, with 23.5% of electricity generation met by renewables in September 2019. While that sounds impressive, it is a relatively modest target and figures show that investment in renewable energy in Australia is actually falling. Michael Coughtrey, managing partner at UHY Haines Norton in Sydney, says that although the government encourages the renewables sector with subsidies and infrastructure funding, Australia remains dependent on coal. “Coal produces about 65% of our electricity,” says Michael. “We need coal and there is a vigorous debate here about developing new coal-fired plants, as some are about to close down.” Progress on renewables is often slower in countries with large and powerful fossil fuel interests. Finland has been able to forge ahead, as Harri Laurikka accepts, partly because it does not produce its own fossil energy: the coal, oil and gas it uses are imported. In Australia and elsewhere, politicians must weigh environmental concerns against the jobs and investment that major international coal, oil and gas companies create, and their significant lobbying power. RENEWABLES ON THE BACKBURNER The pressure giant conglomerates can bring to bear is seriously slowing the development of renewable energy sectors in some countries. At UHY ECA in Poznaǹ, Poland, partner Piotr Wozniak says the Polish government has shown no will to embrace renewables, and that any progress that has been made is the result of legislation imposed by the EU. In Poland, coal is king, providing 80% of the country’s electricity needs and supporting thousands of jobs. The government’s energy policy is focused accordingly. “The result of such policy has been catastrophic for ecology,” says Piotr. “Among others, the development of onshore wind energy was stopped, solar farms were neglected and investments in renewable offshore energy sources (which in the Polish climate would be an ideal energy solution) were not even started. The important role of coal in the Polish economy is continually emphasised.” CHANGE ON THE HORIZON? Poland is lagging behind much of Europe in its commitment to renewable energy. In Poznaǹ, UHY ECA has a client, Viatec, that constructs and maintains turbines for onshore wind farms. Significantly, Viatec quickly realised that the domestic Polish market alone would not be enough to meet its ambitious targets, and has employed UHY’s international network to swiftly build a presence in other European countries. Poland does offer encouragement for renewable energy businesses, through loans to entrepreneurs and programmes to promote small-scale solar energy generation, for example. Another important initiative is the 'Polish Energy Policy until 2040' project, which aims to support the development of cheap offshore wind energy, thereby increasing the country's energy security and reducing the need for energy imports. Despite the piecemeal nature of these initiatives, however, Piotr Białowąs, chairman of Viatec, believes that the situation may be starting to change. “There are some indications that the potential of renewable energy in Poland is changing,” says Piotr. “For example, Poland will have to face the consequences of not fulfilling European obligations ‒ which means the goal of generating 15% of electricity from renewable energy sources by 2020. At the end of 2017 the share of renewable energy was only 11% and 2018 did not bring significant investments into the sector. “But an analysis of reports from listed companies in the energy sector shows that not only has the rhetoric around renewable energy changed, but so have the strategies of large energy concerns. The big Polish energy companies have started making investments in the renewables sector, driven by the increasingly competitive price of energy from renewable sources ‒ so, it is market forces that will help the country accelerate towards a more sustainable energy sector. There is significant potential in onshore and offshore wind energy. The development of offshore wind energy in particular is a chance to lower electricity prices for both enterprises and households, while increasing energy security and creating a local chain of delivery utilising small and medium enterprises.” A GROWING OPPORTUNITY Finland and Poland are both European nations and members of the EU, but on renewable energy at least the countries seem worlds apart. Their contrasting situations exemplify the two-speed nature of renewable energy adoption. Most governments are doing something, but the extent of their support is heavily dependent on local circumstances. However, while the speed of travel differs, the destination is set. UHY member firms are seeing a clear upswing in renewable energy clients. The plethora of subsidies, tax incentives and loans that support the sector, and the scrutiny it attracts from pressure groups and public bodies, mean that professional service providers have a key role to play in the continuing growth of renewable energy generation. As Harri Kanerva, partner at UHY TietoAkseli in Finland explains, being able to outsource to UHY intricate tasks like compliance and reporting, is vital for renewable energy clients as they establish a presence in the sector: “We have a number of renewable energy clients, and they get to concentrate on their own field of expertise. That saves them a lot of time and money.” For an overview of the growth and impact of renewables around the world, see our infographic, Renewable energy – the global landscape

Page 1  |  Page 2  |  Page 3  |  Page 4  |  Page 5  |  Page 6  |  Page 7  |  Page 8  |  Page 9  |  Page 10  |  Page 11  |  Page 12  |  Page 13  |  Page 14