Britain has – just – scraped back into the top 10 most attractive countries for renewable energy investment – but the outlook for the industry remains cloudy amid a lingering lack of clarity around targets and subsidies.
In the latest index of renewable energy country attractiveness (RECAI), the UK has arrested a slide that had seen it fall from fourth place in 2013 down to an all-time low of 14th in October 2016.
The UK now stands at 10th place in the World Top 10 on the RECAI index – and is well behind France and Germany in Europe – while the USA, China and India take the top three spots (see index, above)
The RECAI says that the UK investment environment is more settled than recent years, which were beset by subsidy cuts, but the future post-Brexit remains uncertain.
While the UK is behind schedule to meet its 2020 EU renewables target, coal-fired power has declined significantly and even reached zero for a day on 21 April.
Ben Warren, EY’s Head of Energy Corporate Finance, commented: “Britain’s reappearance in the RECAI top 10 is the result of other countries falling away – notably Brazil which cancelled a wind and solar auction in December – rather than any particularly encouraging resurgence.
“The UK continues to underwhelm investors, who are waiting to see if future UK policy will support and encourage the renewable energy industry towards a subsidy-free environment, where consumers can benefit from the UK’s excellent natural resources for renewable energy.
“Investors are still waiting for clarity around the post-Brexit landscape. Question marks linger around renewable energy targets, subsidies and connections with mainland power markets. Unfortunately, the likelihood of getting complete answers to those questions before Brexit are slim.”
Meanwhile, In April the British government kicked off the second round of renewable energy auctions for Contracts for Difference (CfD) subsidies. The government aims to allocate £730 milliion of annual funding over three rounds – including £290 million in the current round.
But Warren warned: “The CfD funding allocation is relatively modest and there is continued uncertainty around the outcome of the mechanism. In the absence of a buoyant CfD regime it’s difficult to see how the UK can force its way back among the front runners for renewable energy investment.
“However, this round of CfD auctions is open to “less established” technologies such as offshore wind, wave, tidal stream, geothermal and biomass with combined heat and power. Falling costs and advances in technology in the offshore wind industry now represent the UK’s best hopes for future investment, according to the RECAI.
“The offshore wind sector is showing signs of creating a sustainable industry and driving down costs to provide more value for money for UK plc. The technology is becoming increasingly competitive and we are likely to see offshore wind emerge as the clear winner from this round of auctions.”