Investor confidence in UK wind slips again
The latest edition of the Renewable Energy Country Attractiveness Index, released this week by consultancy Ernst & Young, has buoyed countries across Europe.
It reported that nations including France, Belgium, Sweden, Ireland, Norway and Finland became more attractive investment prospects for investors in renewables including wind farms in the last six months.
But there is one exception in this European love-in: the UK, which fell to 14th position, its lowest in these tables since they were launched in 2003. In one sense, the news that the UK slipped is unsurprising, given the uncertainty surrounding every sector in the economy following the UK people's decision in June to leave the European Union.
The report highlights a few specific political decisions that have contributed to the worsening of UK’s ranking position. The government led by Theresa May (above) gave Hinkley Point C nuclear power station the green light in September, which reinforces the impression that her government is sidelining renewables.
This followed the shutdown of the Department of Energy & Climate Change in July to create a new Department for Business, Energy and Industrial Strategy. According to the report, these moves have affected UK’s attractiveness to renewable energy investors.
The UK has still great potential in offshore wind, illustrated by the recent approval of the 1.8GW Hornsea Project 2, which might become the world’s largest offshore wind farm. However, the RECAI report emphasises an uncertain future for the renewables in the UK as May’s government is due to start negotiating UK’s future relationship with the EU.
It is indeed true that the UK will face many challenges once Article 50 is triggered, which is due to happen in March 2017. In the wind sector, these challenges will take various shapes — and one of these is taking shape before our eyes.
Since the UK voted to leave the European Union, the pound has lost almost 15% of its value against the Euro. Pound devaluation might help UK exporters, but it also makes it more expensive for UK-based manufacturers to import products from the EU.
In addition, much of project capital expenditure, especially offshore, is in Euros: this might increase the currency risk and, therefore, uncertainty as electricity from UK projects is sold in pounds. Post-Brexit political and economic uncertainties could challenge the wind sector and affect its attractiveness to investors even further in the next year.
Will the UK address any of these uncertainties and grow investor confidence again? We hope so, and we will look out for the next edition of RECAI in 2017 to find out.