Global investors continue to lose confidence in UK renewables

The UK has continued its slide down the rankings of EY’s biannual Renewable Energy Country Attractiveness Index, reaching an all-time low of 14th.

The Brexit vote, the scrapping of the Department of Energy and Climate Change and the approval of Hinkley Point C “dealt a blow to the country’s already floundering renewable energy sector and its attractiveness in the eyes of investors”.

“Opposition politicians and some observers have raised concerns about the commitment of the new administration to climate policy and clean energy – although other observers welcomed the appointment of Greg Clark, a former shadow Decc minister, to run the new department,” the report said.

There was “some respite” with the approval of the 1.8GW Hornsea 2 project which is set to be the world’s largest offshore wind farm. Nevertheless, the UK’s renewables sector “faces an unknown future as the country negotiates its future relationship with the EU, and May’s new administration comes to grips with a power sector in turmoil.”

“For now the deepest and most easily deployable technologies of wind and solar seem to be absent from the government’s plans,” it added.

Chief editor of the index Ben Warren said: “Continued uncertainty around the government’s energy policy has created a confusing picture for investors seeking a low-risk return. In addition to radical changes to its structure, the government has decided to press ahead with investment in forms of energy that either don’t seem to have the public’s backing, such as shale gas, or have been deemed costly.

“With one more big decision, this time on the future of untested tidal lagoon technologies, expected in the coming months, the government clearly believes that easy to deploy and cost efficient technologies such as onshore wind and solar are not the answer to the UK’s energy security conundrum.”

The index – which ranks countries according to the attractiveness of their renewables sectors to global investors – showed Britain “bucking the trend in European improvement” – falling from 13th place in May,12th place last September and 7th in March 2015. It was overtaken by Morocco (13th) as Belgium (18th), Sweden (20th), Ireland (30th), Norway (32nd) and Finland (35th) all moved up the top 40. France rose one place to seventh and Germany retained its spot in fifth.

“European countries lack the flexibility that exists in emerging markets to transform their energy industries. Their greatest hurdle is integrating renewables with historically centralized conventional power generation,” said Warren. “It began to look like European countries were scaling back their renewables ambitions as a result but in recent months we’ve seen promising new programs materialize around the continent.”

The US came in first place followed by China in second, India in third and Chile in fourth. The top five remained unchanged from the previous index.

The report highlighted an explosion in the green bond market, which saw global sales in the first seventh months of 2016 hit a whopping $48.2 billion. By comparison just $41.8 billion of green bonds were sold in the whole of 2015 and just $11.5 billion in 2013.

“The green bond market is enabling corporates, banks and development finance institutions to tap into enormous demand among investors for clean energy projects. In the last few years, we’ve seen significant growth in green bonds sold by issuers with plans to direct proceeds to environmental ends,” Warren added.

A total of $95.6 billion has been funnelled into renewable energy projects through the sale of green bonds since the market’s inception in 2007. Europe has dominated the market, taking the lion’s share of the total ($55 billion). North America has come a distant second, racking up sales of $19.9 billion.

Within the European market the UK accounted for a modest $1.8 billion, compared to $16.9 billion for Luxembourg, $9.4 billion for France and $4.9 billion for the Netherlands.