In 2015, there was record worldwide investment and implementation of clean energy, according to REN21, the global renewable energy policy multi-stakeholder network. More than twice as much money was spent on renewables than on coal and gas-fired power generation, including a 25% rise in renewable energy investments in the UK, and the trend was reflected in employment too. The number of jobs in the global renewable energy industry grew by five per cent in 2015, in stark contrast to cuts faced by the oil and gas sector. Sweco UK’s energy team grew by 20% in 2014 and a further 8% in 2015. It has been a period of excitement and growth.
Fast forward to 2016 and despite continued investment in the offshore wind sector, the outlook does not look quite as positive. Faced with political uncertainty and the possibility of a Brexit vote, investors rapidly lost confidence in renewable energy in the first half of the year and the impact has been felt throughout the project lifecycle. In fact, in the first six months of 2016 offshore wind installations were down 78 per cent on the same period in 2015 according to WindEurope.
Brexit has had an effect of course, as it has across many sectors. Within a week of the vote Siemens had announced it was putting all new wind power investment plans in the UK on hold, blaming the resulting ‘uncertainty’. But even before the June 23rd vote, investor confidence in the UK energy sector was suffering from a lack of coherent energy policy, with sudden and numerous policy changes.
The Conservative Government has failed to keep Coalition promises about renewable energy strategy, with a lack of long term vision, no transparency and mixed messages from Whitehall all adding to the confusion. In May, the UK fell to an all-time low of 13th in the annual Ernst & Young ‘Renewable Energy Country Attractiveness Index’, which ranks countries according to how attractive they are to investors. The Government’s ‘non-committal approach’ and ‘track record of U-turns’ was blamed.
And even now we continue to receive mixed messages. While the Government maintains that spending on clean energy should be curbed to “protect hard working families”, a report published by Conservative think-tank Bright Blue in June has said that renewables must be the government’s ‘Plan B’ if the (again) delayed Hinkley Point C nuclear power plant does not come to fruition. It is no wonder there is a loss of confidence in the investment community.
Now, of course, we have a new Prime Minister, who immediately dismantled the Department of Energy & Climate Change within her first week of office. Will Theresa May’s newly appointed Cabinet use independence as a chance to reduce our targets for clean energy production? Only time will tell.
Whatever the long term implications, it is clear that in the short-medium term the political chaos is affecting investor confidence, which is bad news for the energy sector and for anybody involved in wind power generation – from design engineers and contractors, to operators and many would argue consumers too.
The role of wind
All is not lost of course. In this current climate, it has become evident that wind power will be key to achieving targets if the UK keeps its commitment to the 2020 climate and energy package, as set out by the European Union’s Renewable Energy Directive, or the UKs own legally binding carbon reduction commitments enshrined in the 2008 Climate Change Act.
In a survey undertaken by Sweco at All-Energy 2016, 86 per cent believe wind will be the energy source most likely to help us achieve 15 per cent of total energy consumption from renewable sources by 2020 – more than solar and hydro combined.
Of those who are planning to invest in a renewable energy related project in the next 12 months, almost one in five (18 per cent) said it is likely to be a wind project, ahead of solar and district heating/CHP (both 14 per cent).
Next steps
Clearly there is still an appetite from some investors, particularly for wind energy. This is backed up by WindEurope’s figures, reporting €14bn of investment in European offshore wind projects in the first half of 2016, split across seven projects and financing a total of 3.7GW of new clean energy capacity. Crucially, roughly three quarters of this investment relates to UK projects, including projects such as Dong Energy’s planned €6bn investment over three schemes including the 170-turbine Hornsea Project One, which will become the world’s largest offshore wind farm.
However, is it enough? Almost half of respondents in our survey (43 per cent) believe the UK is unlikely to meet the target at all due to this loss of investor confidence. It is without doubt the biggest risk to the UK’s renewable energy targets and as we approach a critical period in the 2020 commitment, there has never been a greater need for a coherent energy policy.
As a nation we need transparent, properly consulted and longer-term political support mechanisms to provide the stability needed for long-term investments. Now is the time for Theresa May’s Government to show its energy credentials.
ABOUT THE AUTHOR
Andy King is Director of energy at Sweco UK.
FURTHER INFORMATION
Sweco UK, http://www.sweco.co.uk/