The UK’s attractiveness for renewables investment has plummeted in the last few months thanks to “policy-making in a vacuum”, according to a new report.
And the study from analysts at EY warns that this “inconsistent policy tinkering” could damage investor confidence in other key potential energy growth areas for Britain such as new nuclear, carbon capture and storage and shale gas.
EY has today published its annual Renewable Energy Country Attractiveness Index (RECAI) and for the first time since the survey started in 2003, the UK has dropped out of the top 10, slipping to 11th place.
The report states that this year alone, 23 large-scale projects representing around 2.7 GW of energy “have been publicly abandoned, putting a question mark over the long-term future for the UK’s renewable sector”.
The report also points to the inconsistencies of the latest policy revisions as contributing to the UK’s dramatic fall.
These changes in policy include an end to support for some wind and solar projects and have come about following the UK General Election in May, in which the Conservative Party won a majority, ending five years of coalition with the Liberal Democrats.
Looking ahead, EY states that the government’s latest policy revisions are expected to have “a significant impact on onshore wind investment – a combination of the early expiry of support for projects under the Renewables Obligation and the unexpected loss of revenues from levy exemption certificates are likely to impact both existing and future projects”.
Ben Warren, Energy Corporate Finance Leader at EY said: “Few in the renewables sector would disagree that falling costs mean many renewables projects, particularly onshore wind and solar PV, will be cost-competitive and subsidy-free within the next three to five years. However, by prematurely withdrawing support, the government risks stalling or killing projects that would otherwise maintain the momentum to get the market to that critical point.”
Warren said that investors are currently “trying to make sense of what seems to be policy-making in a vacuum, lacking any rationale or clear intent. Worryingly, this trend of inconsistent policy tinkering could also sour investor confidence in other areas, such as new nuclear, carbon capture and storage and shale gas, as well as offshore wind.”
He warned that the UK renewables sector “is at a crossroads. It can continue to fight this policy tinkering, or see this as an opportunity to throw off the shackles of policy dependency and establish itself at the forefront of unsubsidized renewables in Europe. The latter won’t be easy, but it may well be worth taking the risk.”