The UK’s appeal as a destination for investment in renewable energy is at its lowest level in 12 years, according to the latest Renewable Energy Country Attractiveness Index (RECAI) published today by Ernst & Young.
France has now overtaken the UK in seventh place as the French government works to introduce ambitious targets on energy consumption from renewable sources and streamline project approvals
And the UK’s position in the Global Top Ten in the renewable energy attractiveness index is at risk as it fell to eighth place for the first time since the index was created.
The move comes as a result of the continuing lack of clarity around the future role of renewable energy within the UK’s overall energy mix, and the policy hiatus caused by May’s general election.
Meanwhile, a lack of clarity around whether the recently announced Contract for Difference regime (the competitively bid prices that generators are prepared to sell power at) will be sufficient to stimulate investment in new also contributed to the UK’s slip in the rankings.
Internationally, competition for investment in energy infrastructure is intensifying, posing a threat to the UK’s ability to attract investors, according to the report.
Ben Warren, Energy Corporate Finance Leader at EY said: “The UK’s CfD regime should, on paper at least, deliver the lowest possible cost of energy to the consumer. The challenge is whether renewable energy, having proven itself to be cost effective, is really given a level playing field and sufficient budget to fulfil its potential.
“However, the CfD regime as it stands does raise some questions.The very slow passage of market reform and the late introduction of the CfD regime has made it very difficult for developers to sanction investment in new projects.
“The upcoming election means that we can expect an effective moratorium on energy policy. While it is encouraging that politicians are using this policy “down-time” to issue cross-party pledges on climate change, there is little or no policy behind the rhetoric to convert this into concrete commitments. As a result, the role of renewable energy in the UK’s long-term energy strategy remains unknown at a time when it has become affordable, quick to deploy and can deliver real jobs for the UK’s economy.
“With the UK’s top 10 position now heavily reliant on the appeal of offshore wind, the country’s RECAI future ranking will remain uncertain until the cost of investing in this sector comes down enough to make it a viable alternative.”
Warren concludes: “Powering the future begins by achieving the right generation mix at the most affordable cost. Countries are moving away from a single source approach and instead exploring how renewables fit within, or indeed dominate, their broader energy strategies. The low interest rate environment in more mature capital markets is forcing investors to look both overseas and at new sectors.
“The global renewable energy industry — and with it energy consumers across the globe — can continue to be a major beneficiary of this trend as long as governments give investors consistency in policy and regulation over the longer-term.”