UK now third most attractive clean energy investment market, but global renewables market faces supply chain crunch
The UK has climbed two places to third in EY’s bi-annual ranking of the attractiveness of national renewable energy investment, partly due to the Government’s increasing of wind and nuclear targets in the face of the energy price crisis. However, there are warnings of challenges deploying new solar in any market this year, due to supply chain challenges.
EY has published its Renewable Energy Country Attractiveness Index (RECAI) every six months since 2003, with the 59th edition out today (24 May). The UK has risen from fifth place to third in this edition and is now only beaten by China and the US, which have held the top two spots for several years.
Several policy decisions and major moves in the private sector contributed to the UK’s increase in attractiveness, the report states. Most recently, the Energy Security Strategy set an ambition for 95% of the UK’s electricity generation to be low-carbon by 2030, increasing to 100% by 2035. Nuclear, renewables and abated natural gas are classed as low-carbon by the Government in this case.
To help deliver that headline target, new ambitions have been outlined for the UK to host at least 50GW of offshore wind capacity, of which up to 5GW should be floating, by 2030; and for the UK to host 10GW of green and blue hydrogen production by 2030. Less has been said in terms of support for onshore wind and solar, but EY has stated that investors are encouraged by proposals to simplify the planning process for many kinds of renewables.
On offshore wind, April’s Energy Security Strategy was published three months after Crown Estate Scotland confirmed the successful bidders in the 2022 ScotWind Auction, which marked the first time in more than a decade that plots of Scotland’s seabed were auctioned to renewable energy developers. 17 products totalling 24.8GW were selected. This has provided a major boost for the industry and its supply chains. The RECAI crowns the UK the world’s most attractive destination for offshore wind investment specifically.
EY has also stated that the UK’s decision to relax planning rules for battery energy storage projects, made in 2020 in a bid to help shield the sector from the economic impacts of Covid-19, has made the UK an attractive market for energy storage investors. Figures published last month by RenewableUK revealed that the UK’s energy storage pipeline, in terms of battery capacity, is now twice as large as it was this time last year – 32.1GW. Many of these projects have been granted subsidies in National Grid’s latest capacity auction, to record levels of 1.1GW across 107 projects.
“As governments seek to diverge away from natural gas, it is creating an attractive investment climate for broader and deeper renewables programmes,” said RECAI chief editor Ben Warren.
Other countries to have moved up the rankings for this edition of the RECAI include Finland and Austria, which both climbed seven places. Finland’s success is largely attributed to the introduction of an auction model for offshore wind, under which the first auction will take place in the 2023-2024 financial year. As for Austria, the nation moved in March to back an overarching ambition to deliver 100% renewable electricity supply by 2030 with a €250m funding pot for wind and solar.
Elsewhere in Europe, Denmark’s RECAI position rose by four places. Greece, Germany and Poland, meanwhile, each climbed by three places.
The US and China respectively maintained their spots at the top of the league table. The US received the world’s best score for the attractiveness of onshore wind investments, while China is the world’s most attractive investment destination for solar and hydro.
“The current situation with energy across Europe brings what used to be called the energy ‘trilemma’ massively back into focus — the trilemma being
making energy low carbon, making it affordable and making it secure,” said Octopus Renewables’ co-head Alex Brierley, who spoke to EY for the RECAI.
“Our expectation is that this current situation is going to be a massive accelerator for renewable energy rollout across Europe, and the globe, actually,” he added. “What I think we’ve always struggled with is a lack of global coordination. But I’m seeing evidence of more global coordination and that can only be good thing.”
Supply chain challenges
Time will tell what shape further global coordination on renewables will take, and whether accelerated deployment of new renewable generation capacity in all geographies is practically possible.
To this latter point, The Guardian is reporting that renewable energy developers in Australia and elsewhere are struggling to deliver their projects to time, given that rising global energy prices are pushing the costs of steel and other materials higher. Additionally, supply chains from across China, including for chips and for solar technologies, are facing significant delays.
The World Economic Forum estimates that up to 56% of the utility-scale solar projects which developers are planning to complete in 2022 could be delayed due to supply chain issues.
© Faversham House Ltd 2022 edie news articles may be copied or forwarded for individual use only. No other reproduction or distribution is permitted without prior written consent.