The UK’s appeal as a destination for renewable energy investment is now at its lowest level for almost five years as a result of a combination of domestic and international factors, according to the Renewable Energy Country Attractiveness Index (RECAI) published today by Ernst & Young.
The RECAI report ranks its entries on the attractiveness of their renewable energy investment and deployment opportunities, based on a number of macro, energy market and technology-specific indicators.
The index rankings tracks 40 markets worldwide: Australia, Austria, Belgium, Brazil, Canada, Chile, China, Denmark, Finland, France, Germany, Greece, India, Indonesia, Ireland, Israel, Italy, Japan, Kenya, Mexico, Morocco, the Netherlands, Norway, Peru, the Philippines, Poland, Portugal, Romania, Russia, Saudi Arabia, South Africa, South Korea, Spain, Sweden, Taiwan, Thailand, Turkey, Ukraine, UK and the US.
The sector is currently weighing the impact of a recent consultation on solar subsidies that will see the UK Government withdraw Renewables Obligation (RO) support for solar projects above 5MW two years earlier than planned. In addition, the Government has already allocated the majority of the funding available to support renewable energy projects through to 2020.
Internationally, competition is intensifying and new dynamic emerging markets are increasingly threatening the UK’s ability to attract investors. India’s new government is proactively overhauling its energy sector to galvanize public and private renewables investment. Brazil, Chile, South Africa and Kenya are developing robust deployment pipelines and consistent policy support, while major project financing in the Netherlands and Israel have prompted a boost for these markets.
Ben Warren, Environmental Finance Leader at EY, said: “What we are seeing is a ‘perfect storm’ of reasons prompting a fall in the appeal of the UK’s renewables market.
“The booming UK solar sector, one of only six markets globally to surpass the 5GW installed capacity, was caught by surprise by the Government’s consultation in May. Legal challenges and investor petitions have been launched in response, urging the Government to give the sector more time and greater policy stability to compete with conventional fuels.
“At the same time 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 Contract for Difference (CfDs) regime will have to go a long way to repair the damage of recent policy mishaps.
“The industry must liberate itself from the shackles of the past and go in search of grid parity as the fastest route to secure and affordable energy. The role of policy-makers therefore becomes one of enablement rather than support, and they should be looking to create a level playing field across all energy sources through greater cost transparency.
“In addition, far from just being the remit of the ‘socially conscious’ investor, 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.”