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By Susanna Twidale
LONDON (Reuters) - Britain has dropped a place to a five-year low ranking among the world's most attractive renewable energy markets, after changing the way it subsidises renewable power, a quarterly ranking from accountants Ernst & Young (E&Y) [ERNY.UL] showed on Tuesday.
China regained top spot for the first time since May 2013 after the launch of schemes to boost offshore wind and tidal power projects. The United States, Germany and Japan held second, third and fourth places respectively, with Britain falling to seventh.
Britain's slip comes as the government replaces direct subsidies for renewable power generation with a "contracts–for–difference" (CfD) system whereby qualifying projects are guaranteed a minimum price for their electricity.
"Sixty percent of the funding available has already been allocated leaving investors and developers concerned about budgetary constraints for future projects," said Ben Warren, environmental finance leader at E&Y.
A spokesman for E&Y said its latest ranking for Britain did not take into account Scotland's vote on independence on Sept. 18. A separate report, published by Bloomberg New Energy Finance (BNEF) on Monday, said a "yes" vote would likely "slam the brakes" on investment in new renewable projects in Scotland.
"A vote by Scotland in favour of independence from the UK would be likely to damage clean energy investment, at least in the short term, as developers and banks are gripped by uncertainty over the future shape of the power market," BNEF said.
Scotland provides a third of Britain's total renewable generation and receives a quarter of the country's renewable subsidies, Climate Change and Energy minister Ed Davey said in March.
In July the British government said it would offer payments worth more than 200 million pounds in the first round of contract auctions designed to spur investment in low carbon power generation.
E&Y said Britain's ranking was also hurt by the government's plan to withdraw its old subsidy method, the Renewables Obligation, for large solar projects two years earlier than planned.
Reacting to the policy changes, utility SSE Plc said in March it would shelve two planned offshore wind farm developments after they failed to qualify for state guarantees.
(Editing by David Holmes)