Eversheds comment: UK green energy targets
The UK has set ambitious targets to reduce carbon emissions and increase the energy we use from renewable sources, however, we are a long way off from meeting these.
Michelle Thomas, head of clean energy and sustainability at international law firm Eversheds looked at the issues.
“There are many reasons why the UK is struggling to meet its green energy targets that are compounded by the current constraints on equity and debt capital which have typically been used to fund projects to reduce carbon emissions.
“Consequently, many of the projects needed to come anywhere close to meeting the targets set have to be funded on balance sheet, out of the cash resources of the developers.
“Those with sufficient cash resources tend to be the large utilities, however, the falling price of crude oil and the restrictions in the debt markets means that capital, even in these types of companies, is constrained and will be subject to competing demands.
“In times like these, shareholders will put pressure on the energy companies to focus on more conventional and less risky developments.
“It is also important to understand that clean energy is now very much a global sector. There are a number of developments which put further pressure on UK, and accordingly, UK clean energy ambitions.
“For example, the emerging markets are maturing and countries like India and China are no longer as risk intensive as they once were and can offer attractive returns.
“Countries such as Spain and Germany, which offer certainty and longevity via sensible feed in tariffs for electricity, are currently attracting significant equity investment in comparison to the UK.
“Only the UK government is in a position to help make the UK a more financially attractive jurisdiction and without a doubt the new ROC regime which increases the availability of green certificates will improve this.
“But many in the industry, particularly those developing offshore wind, are concerned that it does not go far enough.
“What can the UK do? As a nation we have to understand that choices have to be made and that the solutions offered by clean energy will not always be ideal but are necessary if the UK is to clean up its act.
“Perhaps most importantly, the UK has to understand that those in a position to develop and fund clean energy projects also have choices and, if we continue to make it too difficult for them, they will simply take their investment capability, their expertise and their commitment to the sector elsewhere.”
Eversheds LLP and its world wide offices have over 3,500 legal and business advisers providing services to the private and public sector business and finance community.
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