Britain's renewable energy attractiveness 'on a landslide'
The UK's attractiveness as a destination for investment in renewable energy has reached an all-time low, due to a series of unexpected green policy U-turns and the on-going uncertainty surrounding the role of renewables in our energy mix.
That's according to a new report published today (9 May) by analyst EY, which spotlights the early closure of the Renewables Obligation (RO) scheme and the unclear future of Contracts for Difference (CfD) mechanism as two prime examples of changes in policy leading to Britain’s slump in global rankings of renewable energy attractiveness for investors.
The Government’s seeming inclination for gas and oil over renewables to plug an expected energy supply gap has resulted in Britain falling to 13th place amongst 40 international renewable energy markets assessed in EY’S Renewable Energy Country Attractiveness Index (RECAI).
This is down two places from 11th place in the RECAI rankings last year, seventh place in 2014 and fifth in 2013. The US (1), China (2) and India (3) all held their positions at the top of the index with the size and scale of renewables activity surpassing other countries.
‘Only way is down’
EY’s energy corporate finance leader Ben Warren said: “A non-committal approach to energy policy is putting the attractiveness of the UK’s renewable energy sector on a landslide. The current approach is going against the grain of almost universal global support for renewables and is masking the UK’s advantages – a growing energy imperative as ageing power plants are retired, strong natural resources and efficient capital markets.
“In the absence of real changes to the direction of policy support and greater demand for renewables in the energy generation mix post 2020, the only way for the UK in our Index seems to be down.”
The RECAI report warns that the pending referendum on a possible EU exit is only increasing investor concerns over the risk of UK clean energy investments, while current record levels of financial support for new projects could fall significantly in 2017 in the aftermath of renewable energy final deadlines.
Britain’s fall in these rankings will come as no surprise to many; coming off the back of repeated warnings about reduced investor confidence in the UK energy market. Earlier in the year, EY stated that the UK "must try harder" to attract investment into renewable generation capacity, as the global power market enters "a year of reckoning".
This latest EY report reflects a 'chop and change' policy environment for renewables which has led to particular uncertainty around the future of the CfD project, scrappage of the RO subsidy support scheme and the removal of the proposed £1bn fund for carbon capture and storage (CCS).
In June 2015, Energy Secretary Amber Rudd announced the RO scheme would be closed to new onshore wind projects from 1 April 2016, claiming that the Government wanted to help technologies stand on their own two feet, rather than encourage them to rely on public subsidies.
More recently, Rudd told MPs that the Government’s next three auctions under the CfD scheme will primarily be aimed at offshore wind, leaving major developers and investors more convinced that the UK is serious about supporting wind power, but less so about the likes of solar PV, biomass and onshore wind.
Last month, the UK's chief climate envoy Sir David King told edie that the Department of Energy & Climate Change (DECC) should concentrate its limited renewable energy subsidy budget on offshore wind, in an effort to drive down costs and increase investor demand.