UK at lowest renewable energy attractiveness level since 2009

The UK's renewable energy sector is at its lowest level of attractiveness for investors in almost five years, according to a new index published today (16 September).

The Renewable Energy Country Attractiveness Index (RECAI), conducted by Ernst & Young, reveals that the UK has failed to attract a sufficient number of renewable energy investors, meaning a drop to seventh place on the index, owing to a number of domestic and international factors.

Ernst & Young’s environmental finance leader Ben Warren said: “What we are seeing is a ‘perfect storm’ of reasons prompting a fall in the appeal of the UK’s renewables market.”

Not only is the UK Government planning to withdraw Renewables Obligation (RO) support for solar projects above 5MW two years earlier than planned, it has also already allocated the majority of available funding to support renewable energy projects through to 2020.

Warren added: “There is simply not much left in the pot. 60% of the funding available has already been allocated leaving investors and developers concerned about budgetary constraints for future projects.

“To continue to compete for international capital, the UK’s market reform and upcoming Contracts for Difference (CfDs) regime will have to go a long way to repair the damage of recent policy mishaps.”

New markets

The Index reveals that international competition is affecting the UK’s ability to attract investors, with a number of new markets beginning to emerge. China has returned to the top for the first time since May 2013, while Europe and the US continue to be overtaken by promising new markets. Germany and Japan were the only two traditionally attractive markets to retain their places, remaining third and fourth respectively.

Warren said: “China’s government is placing increased emphasis on cleantech as the country battles pollution, ushering in new market opportunities for foreign investors.”

There has recently been an inclination towards alternative funding models, with smaller-scale distributed applications such as crowd-funding becoming more critical to both developed and emerging markets.

“Crowd and community sourced finance is increasingly becoming a smart investment channel with a significant role to play in shaping our future energy mix and creating the stimulus for new funding models to emerge,” added Warren.

Looking forward

The move towards democratic finance and the emergence of innovative markets will be critical in maintaining the increase in global investment.

Warren concluded: “Looking forward, advancements in technology, changes in policy, and continuous reduction in cost will enhance the new energy landscape and drive affordable, reliable and low carbon energy in more areas around the globe.”

Lois Vallely

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