Investor interest in UK renewables has fallen to its lowest level in five years, according to Ernst & Young.
The consultancy firm’s latest renewable energy country attractiveness index shows the UK slipped down the quarterly rankings for the third successive time to seventh place – its lowest since December 2009.
Ernst & Young states that the dip in investor confidence is a symptom of policy tinkering and the apparent rush from the government to allocate available funds to a choice few projects.
“What we are seeing is a ‘perfect storm’ of reasons prompting a fall in the appeal of the UK’s renewables market”, said Ben Warren, environmental finance leader at Ernst & Young.
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Chief among the sector’s concerns is the proposal to remove support for solar over 5MW from the renewable obligation scheme in March 2015. Warren explained: “The booming UK solar sector, one of only six markets globally to surpass the 5GW installed capacity, was caught by surprise by the government’s consultation in May. Legal challenges and investor petitions have been launched in response, urging the government to give the sector more time and greater policy stability to compete with conventional fuels.”
In addition, the consultancy firm notes that investor confidence has been hit by the government’s move to allocate the majority of funding available under the new contracts for difference (CfD) regime which is supposed to support projects out to 2020.
Warren added: “There is simply not much left in the pot. 60% of the funding available has already been allocated leaving investors and developers concerned about budgetary constraints for future projects.
“To continue to compete for international capital, the UK’s market reform and upcoming CfDs regime will have to go a long way to repair the damage of recent policy mishaps.”
China leapfrogged the US to become the most attractive country to invest in renewables followed by Germany and Japan. Australia also fell, from ninth to ten, as the Abbott government continued its reform of renewable energy support and financing.
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