Fundamental ideological disagreements within the government about renewable energy have turned away droves of potential investors in crucial new green electricity generators, according to new research, The Independent has reported.
Britain needs to attract tens of billions of pounds of private investment in low-carbon energy in the next decade, to ensure the lights stay on while meeting ambitious environmental targets.
But alarming new research shows that investment in essential industrial-scale wind, water, solar, biomass and nuclear power projects has more than halved in the past three years, in the face of government indecision over its green energy policy.
Experts blame the ideologically divided coalition for its failure to agree a coherent renewable energy policy and its, sometimes public, disagreements about low-carbon electricity subsidies and whether to introduce firm targets to reduce carbon emissions.
They say the resulting uncertainty has shaken the confidence of potential financiers who need a clear sense of their likely returns along with certainty that the government is in favour of green energy and won’t suddenly change its policy.
Although most experts agree that last week’s bill represents a progression, many are discouraged by the decision to drop a legally-binding target to make electricity generation almost entirely green by 2030.
This was proposed by Mr Davey but later overruled by George Osborne and its removal has left many potential low-carbon investors unconvinced about the government’s commitment to renewable energy – although there is a possibility of an amendment to return it to the bill as it passes through Parliament.
Although there has been a steady drum beat of warnings about the dangers posed to investment by what has been dubbed Britain’s “energy shambles”, the stark Bloomberg figures are the first to quantify the impact.
They show that investment in industrial-scale wind, solar, water, biomass and other renewable energy generators Such investment tumbled from a peak of $10.65bn (£6.6bn) in 2009, as potential backers felt increasingly confident that they would be eligible for significant subsidies, to $7.81bn in 2010.
The decline continued last year, as investment fell to just $5.0bn last year – less than half of its peak two years earlier – and is set to fall again in 2012 after just $3.63bn of cash was committed in the first nine months of the year, according to Bloomberg.
Investment in small generators by households and small businesses such as farms, jumped to $3.80bn last year from virtually nothing in 2010 as people scrambled to take advantage of generous government subsidies for solar panels.
However, investment in these small-scale generators has declined this year after the government suddenly and unexpectedly attempted to reduce solar subsidy levels, in a move that the High Court ruled was illegal and which further rocked the confidence of potential investors.
The government has since succeeded in reducing the solar subsidies.
Last week’s bill more than triples of the amount that will be available for a key subsidy to support low-carbon energy generation from £2.35bn next year to nearly £10.0bn by 2021 – much of it to be funded by consumers, who will see about £95 a year added onto the average household bill as a result.
However, although such a substantial sum represents a step in the right direction, critics say that with no indication of how the pot will be allocated to different forms of power generation, and on what terms, investors are still in the dark.