Brexit sees attractiveness of UK for renewable energy investment tumble

21 November 2018 Authored by Consultancy.uk

The persistent uncertainty caused by the Brexit process has blighted many industries throughout 2018. With the deadline for negotiations with Brussels fast approaching, the UK’s renewable energy scene has seen its favourability slide among investors, who are especially apprehensive about the UK Government’s backing away from solar power.

In 2017, strong demand across multiple sectors fuelled another year of solid expansion among the UK’s environmental consulting market. However, beyond market leaders, the industry also saw a severe slowdown in the growth of the sector, exacerbated by Brexit worries and Government policies changing as a result of the UK’s withdrawal from the EU. This reflected uncertainty around the future of the renewables segment in the UK energy market in particular.

Transactions in the power utilities sector have rapidly been shifting toward renewables in recent years. This is thanks to both the improving efficiency and level of power generation renewable technology has attained, and the negative externalities of non-renewables, which are heavily linked to climate change. Despite this, following the 2015 General Election, which saw the Conservative Party win a surprise majority in the House of Commons, cuts to the solar sector were announced, sending the attractiveness of the UK to renewable investors tumbling. 

According to Big Four firm EY, which tracks investor sentiment via its Renewable Energy Country Attractiveness Index (RECAI), that policy had a dramatic impact on the UK’s standing in terms of attractiveness. With the standing of the UK having already been in decline, the treatment of the solar sector by the Government, which lost its outright majority in an election two years later, sent the country tumbling outside of the top ten of EY’s index for the first time. The UK then fell further to a new low – 13th – in  2016, after what EY described as further “antagonistic” treatment of renewables.

The 10 most attractive countries for renewable investors (and previous rank)

Considering the Government is still looking to persuade the nation’s residents that the economy will survive the potential shock of Brexit on the strength of the UK’s reputation for innovation, the current tact regarding renewables is continuing to bemuse investors deep into 2018. Having recently enjoyed a climb back up the rankings, looming Brexit uncertainty has sent the UK spiralling downward once more. The latest edition of EY’s table, which charts 40 countries’ attractiveness as a destination for renewables investment, now places the UK eighth, falling one rung from its previous seventh position.

EY’s researchers believe this slide can be attributed to the possibility that many in the power sector considering that a No Deal Brexit could impact electricity exports and the cost of technology imports. With the country’s on-going Brexit negotiations seemingly at an impasse once more, just months from the March 2019 deadline for secession, a scenario in which the UK leaves the bloc without an agreement in place looks increasingly likely, as beleaguered Prime Minister Theresa May does not only face a backbench rebellion on her proposed deal in Parliament, but the hard-line DUP – which has propped her premiership up since her poor 2017 election campaign – also looks set to vote against it.

At the same time, investors are also concerned that the UK’s moving away from the EU and its numerous environmental conventions will further prompt a shift away from investment in renewables, and a return to less environmentally friendly power sources. To that end, EY also pointed to Chancellor Philip Hammond’s recent Budget, arguing that it included “few positives” for the industry and provided little in the way of encouragement for renewables.

The impact of government policy on investment attractiveness is reflected by EY’s individual technology scores. The total score a nation is attributed is made up out of a number of renewable technology scores. These are Onshore wind; Offshore wind; Solar PV; Solar CSP; Biomass; Geothermal; Hydro; and Marine. Each country is marked per technology, and while the UK does well in other areas, it scores just 41 points overall. The UK’s solar PV score is lower than all but one other nation – Denmark – in EY’s top 20 ranked nations. Indeed, the UK is ranked 35th out of the 40 nations included within EY’s RECAI, with just the aforementioned Denmark, Belgium, Ireland, Poland and Sweden scoring lower than the UK.

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