A series of Government announcements over the summer may have improved prospects and contributed to increased levels of activity in the UK renewables sector, but are not enough to attract investment in the long term, says EY (formerly Ernst & Young) in its Renewable Energy Country Attractiveness Indices (RECAI) released in late August.
The last three months saw crucial announcements such as the proposed CfD (contracts for difference) strike prices, new borrowing powers and an additional £800m for the Green Investment Bank, and the Energy Bill securing its passage through to the House of Lords. However, EY claims that many of these announcements were already overdue and do not go far enough to sustain current high levels of investor activity.
Ben Warren, Environmental Finance Leader at EY commented: “The flurry of Government announcements has been welcomed with a sigh of relief by the sector and contributed to the current hiatus of activity and the UK’s improved position in our index. But, what we are witnessing is nothing more than basic, isolated measures that had been stalled for way too long. Much work is still needed to convert this patchwork of measures into a complete, balanced and strategic plan that will sustain activity in the long term.
“After a long period of silence, the Government is now playing catch-up with investors who are not short of opportunities in other countries. While these announcements come as a pleasant surprise, this is no time for complacency, as important pieces of the jigsaw are still missing if we want to produce an attractive framework.”
According to the report, while the proposed CfD strike prices appear relatively attractive, particularly for offshore wind, the proposed rates are still subject to consultation and state aid approval, and the market will need more detail to fully assess the risks and rewards. The latest announcements were also notably lacking any reference to power-only biomass. The Government’s controversial move toward shale gas appears to be at the expense of biomass power, which arguably still has a critical role to play in expanding the UK’s low carbon base-load power. Meanwhile, the defeat of a proposed 2030 decarbonisation target and the apparent push back of the ambitious 18GW offshore wind target by a decade have undermined confidence in the Government’s commitment to renewable energy.
Warren concludes: “Overall, the sector’s positive reaction to recent announcements and current high level of activity point to a liquid and buoyant renewables market. Global investors and developers, however, need more than piecemeal policy details. The Government must come up with a credible and consistent energy plan that offers in a timely manner the clarity and information required to make long-term investment decisions”.