Report: UK energy firms risk diverting £115bn overseas due to poor green policies

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This according to a report by the UK Sustainable Investment and Finance Association (UKSIF), comprising 300+ members overseeing more than £19trn in assets globally.

UKSIF surveyed 100 business decision-makers within the UK energy sector, collectively representing a turnover of £700bn, to gauge their perspectives on the current opportunities and obstacles to decarbonising the UK energy system.

According to the report, nearly nine out of ten (87%) UK energy businesses emphasise the necessity of UK policy changes to enhance the country’s attractiveness as an investment hub for green energy.

Furthermore, 81% of large UK energy companies recognise the UK’s trailing position compared to other nations in the race to become the most sought-after market for low-carbon energy investments.

UKSIF’s chief executive officer James Alexander said: “An international race is underway between countries to become the most investible market for green energy and, currently, the UK is taking its leading position for granted.

“We are calling for practical and cost-effective measures that will advance the transition to a green economy. Not only do we see no excuses not to accelerate these, but failure to do so limits the UK’s growth potential and threatens the UK’s position as a world leader in green finance and the undisputed financier of the net-zero transition.”

Late last year, EY ranked the UK as the world’s seventh most attractive market for clean energy investors. It downgraded the UK from fourth due to a lack of efforts to speed grid connection delays and ease supply chain costs.

Three-step plan to progress

UKSIF highlights three crucial steps needed to encourage more investment and speed up the development of the UK’s future energy infrastructure.

Firstly, it suggests revamping planning regulations to eliminate barriers and shorten the time required to launch large energy projects.

Last year, research from BBC revealed that around £200bn of renewables projects are facing waiting times of 15 years to come online.

The UKSIF report emphasises that simplifying the approval process and reducing decision timelines could prompt a 40% increase in sustainable energy investment by energy companies in the UK.

Additionally, the UK Government has been urged to ensure adequate grid capacity to minimise connection delays.

The report highlights that allowing the regulator to authorise increased private sector investment would expedite grid expansion and related infrastructure development, facilitating the connection of more low-carbon projects.

Lastly, the report recommends reforming energy pricing mechanisms to promote long-term investment in UK low-carbon power capacity. This includes enhancing the Contracts for Difference (CfD) auction process to better support investment in the UK’s supply chain.

Offshore wind farms

In September, the CfD auction round saw a record number of clean energy projects secure funding, but no offshore wind projects had bids accepted, reducing total capacity.

Responding to pressure, policymakers moved in November to boost the maximum strike price for offshore wind under the CfD scheme.

Last week, a report from RenewableUK revealed that the Government could increase the nation’s renewable energy sector by 10.3 gigawatts (GW) through the upcoming CfD auction.

The report indicates that 14 wind farms are currently eligible to participate in the next auction.

Moreover, the report notes the potential for an additional 4.7GW of new offshore wind capacity, pending Government consent, which could bring the total eligible capacity for the auction to 14.9GW.

While eligibility doesn’t guarantee participation, it underscores the growth potential in the offshore wind sector.

For context, the report highlights that just one gigawatt of offshore wind can power more than a million British homes for an entire year.

Looking ahead, the report forecasts a further 5.2GW of offshore wind projects already under construction in UK waters, with projections suggesting nearly 45GW could be operational by the end of 2030.

With the Government slated to outline the parameters for the upcoming auction next month- and to deliver the Budget –  RenewableUK is urging ministers to set ambitious goals to maximise the capacity secured and further propel the UK’s transition to clean energy.

RenewableUK’s chief executive Dan McGrail said: “In this year’s auction, we have the potential to prove again that Britain is one of the best places to invest in new offshore wind projects.

“If this is done in the right way, we can secure billions in private investment, driving the growth of the UK’s offshore wind supply chain and new jobs in the sector.”