Germany the most attractive market to invest in smart energy, industry survey finds

Out-Law News | 04 Oct 2017 | 11:00 am | 2 min. read

Germany is the number one market in the world for investing in smart energy, a new industry survey has found.

According to the results of the survey, published in a new report on smart energy by Pinsent Masons, the law firm behind Out-Law.com, 34% of investment entities named Germany as a country where they are "looking to make an investment or acquisition". China (30%) and Australia (26%) were the next most commonly cited countries. The UK is being considered as a country to make an investment or acquisition by 22% of investors, the report said.

This is part of our series analysing the challenges and opportunities ahead for companies embracing smart energy technologies. For more, sign up to receive an exclusive Pinsent Masons research paper on smart energy technology, supply, storage and investment.

Senior executives from private equity firms, investment banks and sovereign wealth firms based around the world were among the respondents.

Germany is also the "preferred investment destination" for electricity generation and distribution companies, according to the new report. It said that 29% of executives from the utilities surveyed had named Germany, compared with 17% who named China and 12% the UK as their preferred investment destinations.

The opportunities for deploying energy infrastructure in greenfield sites, the level of existing technological innovation and a stable regulatory framework or cohesive national energy policy were the top three most cited factors that investors said make a country attractive for investment in smart energy technology, according to the report.

For utilities, the top three factors were the level of existing technological innovation, the opportunities for deploying energy infrastructure in greenfield sites, and favourable demographics or demand outlook.

The survey found that industry believes Germany has the "clearest smart energy policies", ahead of the UK, Sweden and Norway who were the next most commonly referred to by respondents.

"The government’s commitment to decarbonise power generation and phase out nuclear plants in the wake of the Fukushima nuclear disaster have led to a radical shake-up of the system, under the policy known as Energiewende (energy transition)," the report said. "This is the biggest programme of its sort yet seen in a developed nation."

The "abundant opportunities" on offer, and the fact investors can secure "easy exits", are among the particular traits that make Germany attractive to investors, according to the report.

Pinsent Masons said "declining wholesale electricity prices and rising costs" is encouraging electricity generators and distributors to look into potential "tech deals" as a way to "develop new capabilities".

"Traditional utilities – including the big ones – are looking for new business areas," energy law expert Dr Torsten Wielsch of Pinsent Masons said. "Declining returns from electricity sales means they are trying to expand into other business fields, and one of these is smart energy companies such as software developers."

Despite Germany's popularity, North America and the Nordics regions were each rated higher than Western Europe by survey respondents for the areas' financial attractiveness for the implementation of smart energy projects, growth potential for smart energy technology and research and development, and for their existing grid infrastructure for implementing new technology, according to the report.