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A spate of recent government cuts to renewables subsidies has caused the attractiveness of the UK’s renewables market as an investment destination to plummet, according to EY.
Inconsistences in policy revisions and the abandonment of several large-scale projects means the UK has lost its top 10 spot in EY’s league table of the 40 most attractive renewable energy markets for investors, slipping to 11th place, in the group’s Renewable Energy Country Attractiveness Index (RECAI) has found.
EY energy corporate finance leader Ben Warren said: “Few in the renewables sector would disagree that falling costs mean many renewables projects, particularly onshore wind and solar PV, will be cost-competitive and subsidy-free within the next three to five years.”
However, he warned that by prematurely withdrawing support, the government risks “stalling or killing projects” that would otherwise “maintain the momentum to get the market to that critical point”.
“Investors are currently trying to make sense of what seems to be policy-making in a vacuum, lacking any rationale or clear intent,” he said. “Worryingly, this trend of inconsistent policy tinkering could also sour investor confidence in other areas, such as new nuclear, carbon capture and storage and shale gas, as well as offshore wind.”
The report pointed out that the government’s latest policy revisions will have a significant impact on onshore wind investment. A combination of the early expiry of support for projects under the Renewables Obligation (RO) and the unexpected loss of revenues from levy exemption certificates are likely to impact both existing and future projects.
“The UK renewables sector is at a crossroads,” Warren said. “It can continue to fight this policy tinkering, or see this as an opportunity to throw off the shackles of policy dependency and establish itself at the forefront of unsubsidised renewables in Europe. The latter won’t be easy, but it may well be worth taking the risk.”
A recent EY survey carried out on behalf of Scottish Renewables showed the early withdrawal of RO support is already hitting investor confidence and the willingness to lend to onshore wind farm developers, jeopardising the sector’s competitiveness.
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