“A lot of regulatory and political uncertainty within the UK over the last 12 to 18 months has led to increased international competition for renewables,” according to Adam Berman, deputy director of policy at Energy UK.
The UK, which originally had taken a “leading role” in decarbonisation and its technologies, now has started to lose out on the race due to competition internationally. Notably, these competitors include the EU and US – both of which have supported investment in the sector via huge support packages.
The UK however has seen turbulent times. Speaking at a Business, Energy and Industrial Strategy Committee roundtable focusing the decarbonisation of the power sector on Tuesday (21 March), Berman highlighted the fall from grace the UK has experienced due to political instability and inconsistent policy. Alongside this, rising inflation has impacted low carbon developers.
“If you are a low carbon developer, you face a number of challenges in the UK. You face inflation and interest rate increases, which have obviously increased cost of capital, particularly debt financing, and a supply chain crunch where commodity costs have increased faster than that of inflation signal,” Berman said.
This perspective coincides with recently released data by Cornwall Insight which revealed that the rising cost of capital meant that already commissioned projects had become financially unviable, meaning many potential projects could be put on hold until financing is acquired. This delay could have severe consequences on the nation’s net zero ambitions.
To prevent the loss of developers and renewable investors to other international countries, Adam Bell, head of policy at Stonehaven, believes that the UK must specialises in specific areas of the energy transition to capitalise and attract external investment.
“We need to look at areas where the UK can specialise and genuinely deliver new value that is world beating,” Bell said.
“We have significant wind resources, and I’ll be looking to see what the government can do to lower financing costs for new wind assets of the scale that we’re going to need to reach 2035 targets.”
The UK government recently stressed the need to support the budding wind sector in the UK, both offshore and onshore, and agreed to remove the de facto ban on new onshore wind developments in the nation.
In November, Simon Clarke MP, the former Secretary of State for Levelling Up, Housing and Communities, put forward an amendment to the Levelling Up Bill that would allow local planning authorities to approve onshore wind projects.
The amendment has gained significant support from other members of the Conservative party, including the likes of former Prime Ministers Liz Truss and Boris Johnson, as well as Alok Sharma, president of COP26.
Following this, the government confirmed it would relax its de facto ban on onshore wind which was first introduced in 2015. The changes however brought scrutiny from the industry with many claiming only “minor” changes had been made.
This is a step to make the UK more competitive in the international wind market and capitalise on the UK’s rich natural resource to become a global leader. This could therefore attract international investment to scale renewable generation and energy storage to capture the intermittent green energy.
Rachel Fletcher, director of regulation and economics at Octopus Energy, believes the UK is already a leader in the race to net zero and could further capitalise on this leading position by harnessing its tech sector.
“We’re way ahead of most of the western world when it comes to decarbonisation. As it turns out, we’ve got the third biggest tech industry in the world as well and I think the there’s a real opportunity to bring these two things together and for Britain to place itself as a global leader in designing and running low carbon systems using state of the art technology,” said Fletcher.
“We need to set out that vision and that sense of optimism and then follow through with some of the enablers. This would really help to open up new investment opportunities and to create a real sense of confidence in where the British decarbonisation effort is going.”
