UK's clean energy investment ranking drops amid Covid-19 funding crunch
The UK has fallen one position to fifth in EY's bi-annual ranking of the attractiveness of national renewable energy investment. The drop is largely attributable to a lack of green finance - a challenge EY believes is likely to be overcome in the coming months.
EY has published its Renewable Energy Country Attractiveness Index (RECAI) every six months since 2003, with the 58th edition out today (12 October). This edition has seen the UK falling by one place from fourth in the previous edition.
The UK’s drop has been attributed to a dip in funding from both the central UK Government and the private sector, due to the impact of Covid-19 on the economy.
However, EY has stated that funding from both sources is primed to scale up significantly in the lead-up to the next edition of the RECAI. The organisation has stated that the forthcoming contracts for difference (CfD) auction round of £265m – the largest round to date – will be “instrumental” in incentivising investment. It predicts that up to 7W of offshore wind and 5GW of onshore wind and solar will be supported via this CfD round.
Moreover, the UK Government has this month formalised a commitment to end electricity generation from unabated fossil fuels by 2035. This will require a significant shift away from natural gas.
Also cited as a likely driver of investment in the UK’s clean energy space in the near term is the Hydrogen Strategy. Published in August, the Strategy is headlined by a commitment to mobilise £4bn of investment in blue and green hydrogen generation, distribution, usage and storage this decade. A new business model for hydrogen, based on the CfD, will be established to enable this scale-up in funding.
Looking at the other nations in the RECAI’s top five in this edition, the US and China maintain first and second place respectively. India retains third place, having jumped up the rankings since May 2020, when it came in seventh. France leapfrogs the UK to take fourth place.
The top ten is then rounded out by Germany, Australia, Japan, Brazil and Spain.
EY’s overall conclusion is that “conditions are ripe for renewable energy to keep growing rapidly”, following a 2% global increase in renewable energy generation capacity in 2020, in spire of the pandemic. The prospects look “even rosier” for 2021, EY has stated, as we approach COP26.
Nonetheless, EY is warning that the sector is likely to face bottlenecks that could threaten continuing rapid growth in the coming years, such as the challenge in increasing grid infrastructure to match the pace of electrification and the addition of new renewable generation.
“With global leaders convening at COP26 in November, we are approaching what could be a watershed moment in combatting the climate crisis,” said EY’s global renewables leader Amaud de Giovanni.
“Increasing investment and policy support has enabled renewables growth to continue at breakneck speed. If sustainability goals are to be met, however, a 50% increase in grid spending could be needed over the next decade as markets adapt for a net-zero future.”
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