Regulatory concerns deterring renewables investors

A poll of investors has identified a lack of liquidity and insufficient regulation as the chief blockers to backing renewable energy projects.

The Downing LLP survey of 100 professional investors, who collectively manage £118 billion in assets, revealed a lack of liquidity in certain areas of the renewable energy sector was the main barrier to investment for 75% of those polled. Some 70% said regulation needed to improve, while the same percentage pointed to high costs as an obstacle to investment in renewables.

More than half (54%) said there was not enough transparency in the renewable energy asset class, while 31% cited a lack of track record or data in certain areas.

Nearly all (94%) of respondents said the renewable energy sector will become more attractive in the next three years, with 45% saying it will be “much” more so and 49% saying “slightly” more.

When asked to pick their top three reasons for the sector becoming more attractive to investors, 71% highlighted the macro-economic environment. At the same time, half flagged a predicted fall in fixed income yields.

Some 61% mentioned expected regulatory changes to encourage decarbonisation in their top three factors making renewables more appealing to investors. Nearly half (46%) include tougher regulation against oil and gas companies in their top three.

Liquidity too is expected to improve with 62% of respondents anticipating more investment opportunities in renewable energy.

Tom Williams, head of energy & infrastructure at Downing, said: “Renewable energy is gaining more importance to institutional investors and wealth managers as they consider the climate change risk to their portfolio. However, the asset class needs to be more transparent, lower cost and be supported by appropriate regulation.”