The attractiveness of the UK renewables sector “remains marred by conflicting messages around its role in the country’s future energy mix”, according to a report from analysts at EY.
EY’s latest Renewable Energy Country Attractiveness Index ranks the UK in eighth place – its lowest level in 12 years.
The study states that last month’s General Election result – in which the Conservatives won a majority, ending the party’s five-year coalition with the Liberal Democrats – should now act as a springboard to stimulate renewables investment.
“The UK must seize the window of opportunity that post-election political stability is presenting, in order to reconcile its contradictory energy objectives and reboot the attractiveness of its renewable energy market,” it says.
Ben Warren, Power & Utilities Corporate Finance Leader at EY, said: “The frustration of the renewables sector stems from a fundamental inconsistency between the government’s rhetoric and its actions. Despite championing a market-driven energy sector, policy decisions are clearly picking winners and losers and ignoring signals from the market that onshore wind and solar PV can deliver affordable energy.
Warren said that the government “is chasing climate change targets, while favouring more expensive projects to the detriment of more cost-competitive renewable energy technologies that have the backing of the public”.
He added that the election outcome “provides the government with a unique opportunity to address this inconsistency and reconcile its contradictory energy objectives. Investors will not put money on the table without some clear signals that the government intends to seize this opportunity.”
Warren warned that a proposed EU referendum is also “fueling further uncertainty over the future UK energy policy that could hinder investment”.
He said the new government’s pledge to hold a referendum on UK membership of the EU within the next two years has “prompted nervousness around the UK’s commitment to long-term decarbonisation targets if it is no longer bound by EU Directives, and could see energy companies developing contingency plans in the event on an ‘out’ vote. However, few in the market seem to foresee appetite to undo the current and ongoing reform programme.”