Political uncertainty dampens UK's appeal for renewable energy investors
The UK is losing its appeal as a destination for investment in renewables as a continuing lack of clarity round the future of the UK's green energy mix and a policy hiatus caused by the upcoming General Election take their toll.
That's according to EY's Renewable Energy Country Attractiveness Index, which ranks 40 countries based on the attractiveness of their renewable energy investment and deployment opportunities. The UK has dropped to eighth place on the Index - one place below last year, marking its lowest ranking in 12 years.
A lack of clarity around whether the recently-announced Contract for Difference (CfD) regime - the competitively bid prices that generators are prepared to sell power at - will be sufficient to stimulate investment in green energy has also contributed to the UK's slip in the rankings, EY says.
"The UK's CfD regime should, on paper at least, deliver the lowest possible cost of energy to the consumer," said EY's energy corporate finance leader Ben Warren. "The challenge is whether renewable energy, having proven itself to be cost effective, is really given a level playing field and sufficient budget to fulfil its potential.
"However, the CfD regime as it stands does raise some questions. The very slow passage of market reform and the late introduction of the CfD regime has made it very difficult for developers to sanction investment in new projects."
Internationally, China, the US and Germany take up the top-three spots on the Index. France has overtaken the UK as the French Government works to introduce ambitious targets on energy consumption from renewables in its imminent energy transition bill. And a general increase in competition for investment in energy infrastructure across the globe is further threatening the UK's ability to attract investors.
With the UK General Election taking place in May, EY concludes that a solid green policy will be needed by the new Government to recapture investor confidence.
"The upcoming election means that we can expect an effective moratorium on energy policy," added Warren. "While it is encouraging that politicians are using this policy 'down-time' to issue cross-party pledges on climate change, there is little or no policy behind the rhetoric to convert this into concrete commitments. As a result, the role of renewable energy in the UK's long-term energy strategy remains unknown at a time when it has become affordable, quick to deploy and can deliver real jobs for the UK's economy."
With the UK's top-10 position in this Index heavily reliant on the appeal of offshore wind, EY says policymakers must provide long-term funding certainty. "The country's RECAI future ranking will remain uncertain until the cost of investing in this sector comes down enough to make it a viable alternative," Warren concluded.