A plethora of policy announcements in the three months to August withdrawing support for renewable energy have seen the attractiveness of the UK’s renewables market as an investment destination plummet, according to EY’s Renewable Energy Country Attractiveness Index (RECAI).
The UK has for the first time lost its top 10 spot in EY’s league table of the 40 most attractive renewable energy markets for investors, slipping to 11th place.
This year alone, 23 large-scale projects representing around 2.7GW of energy have been publicly abandoned, putting a question mark over the long-term future for the UK’s renewable sector.
The report also points to the inconsistencies of the latest policy revisions as contributing to the UK’s dramatic fall.
Looking ahead, the Government’s latest policy revisions are expected to have a significant impact on onshore wind investment, according to the report.
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.
As 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.
Jenn Hazlehurst, partner and northern head of Power and Utilities at EY, said: “Few in the renewables sector would disagree that falling costs mean many renewables projects, particularly onshore wind and solar PV, can become cost-competitive and subsidy-free within the next three to five years.
“However, by prematurely withdrawing support, the Government risks stalling or closing projects that would otherwise maintain the momentum to get the market to that critical point.
“Investors are currently trying to make sense of the recent changes.
“Worryingly, this trend of inconsistent ongoing policy changes could also sour investor confidence in other areas, such as new nuclear, carbon capture and storage (CCS) and shale gas, as well as offshore wind.
“The UK renewables sector is at a crossroads. It can continue to fight policy, 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.”