India has overtaken the US in order to become the second-most appealing nation after China for renewable energy investment, according to a written report by UK accountancy firm EY.

In a yearly position associated with the top 40 renewable energy markets worldwide in terms of allure, China was ranked at the top, followed by India.

The US slipped to the third spot from first in last year’s ranking, EY said. “The fall, the first for the US since 2015, to third in the ranking of the top 40 countries follows a marked shift in US policy under the new administration,” it said.

India was ranked third on last year’s EY renewable energy country attractiveness index (RECAI) behind the US and China.

“India continued its upward trend in the index to the second position with the government’s programme to build 175 gigawatts (gw) in renewable energy generation by 2022 and have renewable energy account for 40% of installed capacity by 2040,” EY said in a statement.

The US, it said, has added a lot more than 10 gw of solar capacity within the last few 36 months, beginning with a minimal base of 2.6 gw in 2014. Also, there clearly was a record new wind capability of 5.4 gw installed in 2016-17.

Within the report, EY said: “A combination of strong government support and increasingly attractive economics has helped push India into the second place.”

In latest tenders, solar builders have agreed to supply power at low prices than newly-built coal plants, effectively blocking new coal capacity.

“India’s 2022 target, set by Prime Minister Narendra Modi in 2014, includes 100 gw of solar, 60 gw ground mounted and 40 gw rooftop. The Wind is expected to deliver 60 gw, with biomass and small hydro accounting for the remaining 15 gw,” EY said.

In 2016-17, India added 12.5 gw of renewable energy potential, in comparison to 10.2 gw from conventional sources.

Solar powered energy tariff has fallen more going to an innovative new low of Rs 2.44 per unit in the recent auction conducted for Bhadla solar park.

“However, such low bids raise questions over whether developers are taking on excessive risk. On the one hand, falling bids track lower technology costs and cheaper capital, allowing developers to maintain margins. On the other hand, those margins are already squeezed by the competition that auctions tend to generate. Some projects may not be delivered or quality may be compromised,” it said.

The EY report said the US government needs to enhance compliance utilising the Renewable Purchase Obligation (RPO) programme as well as guaranteed distribution by companies having the ability to continue steadily to buy renewable electricity.

“And the availability of capital remains a concern; the government could ease rules around tapping foreign debt,” it said, adding that the government faces several other challenges, including land acquisition, in meeting the 175 gw target.