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UK Renewable Energy – Will there be a return in investor confidence?

Rory Chandler

The UK is a global leader in renewable generation with nearly a third of all electricity generated in 2017 coming from clean energy sources. In particular offshore wind, where the installed capacity is over 5GW, the largest of any country in the world.

Despite the evident success of UK renewable energy over the last decade, new investment has been falling drastically.

In 2017 UK green investment fell by 56% despite overall global investment being the second highest on record. Thinktank Green Alliance postulate that Investment in wind, solar, biomass power and waste-to-energy projects will decline by 95% between 2017 and 2020.

Many will find this surprising as it is impossible to avoid the weekly headlines highlighting the success of renewable power over conventional coal and nuclear energy. This is because we are reaping the reward of significant investment from years ago, with the current slump not having an impact until further down the line.

There are a number of factors attributing to the decline including falling costs and investors targeting larger returns, but the most significant is the change in government policy. In 2015 the majority of renewable subsidies were withdrawn leaving uncertainty for investors thinking about future projects in the UK.

Onshore wind which has been quoted as “intermittent and inefficient” is the cheapest form of electricity generation but despite this planning applications for new projects are down 94%. This aversion to onshore wind has also had a crippling effect on the solar market which has become practically non-existent.

It is not all bad news however, with the recent EY Renewable Energy Attractive Index putting the UK in seventh place (10th last year) suggesting that the current climate is in a transition period and will pick up over the coming months.

Subsidy free projects coupled with the exciting emergence of new technologies and blockchain are forecast to accelerate growth in the report with a potential 18GW of new capacity expected with £20bn of new investment.  Developers now being able to make a profit on subsidy-free projects bodes well for the future and will certainly help regain investor confidence in the UK market.  

At The Green Recruitment Company we have witnessed the change in strategy first hand with our clients targeting utility scale projects abroad where the government policy is more accepting and returns are more attractive. Examples can be seen in the Australian and Latin American markets where we have been assisting funds and developers either looking to enter or ramp up existing portfolios in the region.

In the UK many are looking to diversify their portfolios into new technologies, VC and growth capital. These investments in the domestic market have predominately focused on energy storage, transmission, smart grid, efficiency and wider clean tech. Gore Street Capital are leading such initiatives by raising the first energy storage fund, with an anticipated pipeline of 10-13 projects over the next year or two.

The market still needs time to settle, but it seems the renewable industry is maturing and adapting to the current constraints rather than constricting. The falling costs of renewable energy now mean subsidy free projects coupled with the emergence of battery storage will mark a return of investment to the UK market. 

It is clear there is still appetite for growth, so providing there is a commitment from the government to promote and protect the industry, investor confidence will return, and the UK will continue to be at the forefront of green investment.