According to EY’s Renewable Energy Country Attractiveness Index (RECAI), the UK’s appeal as a destination for renewable energy investment is now at its lowest level for almost five years.
The sector is currently weighing the impact of a recent consultation on solar subsidies that will see the UK Government withdraw Renewables Obligation (RO) support for solar projects above 5MW two years earlier than planned, according to professional services firm EY.
In addition, the Government has allocated the majority of the funding available to support renewable energy projects through to 2020.
EY said competition is also intensifying internationally and new dynamic emerging markets are increasingly threatening the UK’s ability to attract investors.
For example, India’s new Modi government is overhauling its energy sector to incite public and private renewables investment.
Brazil, Chile, South Africa and Kenya are developing deployment pipelines and consistent policy support.
EY environmental finance leader Ben Warren said: “What we are seeing is a ‘perfect storm’ of reasons prompting a fall in the appeal of the UK’s renewables market.
“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.
“At the same time 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 Contract for Difference (CfDs) regime will have to go a long way to repair the damage or recent policy mishaps.”
China returns to the top for the first time since May 2013 while Europe and the US continue to lose ground to emerging markets, according to the RECAI, which ranks 40 renewables markets on their attractiveness in the eyes of investors.
The latest report highlights that Europe is currently at an inflexion point, striving to become a global sector leader but facing strained infrastructure and supply capabilities.
Mr Warren concluded: “Consumers, including home owners, commercial businesses and corporations, are becoming more empowered to take control of their own energy supply and demand.
“As a result, investors are also becoming increasingly motivated and empowered. This is not only driving the democratisation of energy, but is also channeling significant volumes of capital to where they are most needed.
“Looking forward, advancements in technology, changes in policy, and continuous reduction in cost will enhance the new energy landscape and drive affordable, reliable and low carbon energy in more areas around the globe.”