UK falls to fifth for renewable energy attractiveness

The UK has fallen to fifth, behind Japan, in terms of how attractive it is for renewable energy investors.

In EY’s quarterly Renewable Energy Country Attractiveness Index (RECAI), the UK has slipped from fourth place due to “prolonged policy uncertainty” and the news that a series of offshore wind projects have been cancelled.

At the same time in Japan, a “rapid solar market growth” and a “burgeoning” offshore sector have seen it climb above the UK.

The “mixed messages” that are being displayed by the UK government, is potentially putting £330 billion of investment, which the Institutional Investors Group on Climate Change said is needed to secure future power supplies, at risk.

The report comes after it was revealed the Dogger Bank offshore windfarm zone was being scaled back, and that phase two of the London Array offshore windfarm would not be going ahead.

Further cancellations “might be expected” according to the report, because more than 40GW of offshore capacity has been allocated, which is more than the 2020 target of 10GW set out, and budgeted for, by the government.

Ben Warren, EY’s environmental finance leader, said: “The UK’s fading appeal is the direct result of the lack of clarity on the government’s long-term energy strategy at a time when energy security is a concern and investors are looking for commitment.

“Recent announcements around Contracts for Differences have been perceived by some investors as a risk to investment stability, for onshore wind in particular, given the regime changes and subsidy cuts already planned.

“At the same time, the UK offshore sector has also taken a battering, with a number of high-profile projects being mothballed in recent months.”

Despite this, there are said to be “signs of buoyancy” in the sector, with more than 18GW of applications for the final investment decision enabling programme and the historical “resilience” shown by the UK’s renewable sector compared to other European markets.

Warren added: “In 2013, despite an 11 per cent dip of investment in the sector globally and 44 per cent across Europe, the UK market only saw a modest 8 per cent decline from the record number of £14.3 billion investment in 2012.

“The UK Government and the renewables sector need to work together to regain investors’ confidence and realise the UK market’s potential.”

The Renewable Energy Association chief executive, Dr Nina Skorupska, said the UK’s fall in the RECAI ranking “is not surprising”.

She added: “Investors are already looking at projects post-2020 but they have no clear steer from the EU or the UK Government that they see a major role for renewables once the existing 2020 targets are met.

“Setting binding renewables targets for Member States will boost investor confidence, bring down capital costs faster and create jobs for British businesses.”