The UK has dropped a position in Ernst & Young’s latest global renewable energy Country Attractiveness Indices report (CAI), due to concerns that the Department of Energy and Climate Change’s (DECC) commitment to renewables is wavering after increased speculation that the department is ready to embrace natural gas as the bridge fuel for the country.

The report shows the UK has dropped from fifth to sixth position in the company’s renewable indices. The CAI continues by acknowledging that DECC’s handling of the solar FiT has disrupted the UK solar industry and had an adverse effect on consumer confidence. However, the CAI welcomes the latest Electricity Market Reform bill which will see significant investment in the UK’s ageing transmission infrastructure for renewable energy sources.

Ben Warren, Ernst & Young’s Energy and Environmental Finance Leader, explains: “There is significant concern across the green energy sector that the Government will shift its focus towards natural gas as an alternative to renewables. The Electricity Market Reform needs to deliver the right framework to stimulate investment across all forms of energy generation, including renewables.  

He adds: “The recently published draft energy bill is a welcomed step in the right direction and signals clear progress. However, it is important we clarify certain aspects of the new regime, particularly around the off take arrangements for independent generators in order to avoid uncertainty for investors.”

The UK’s poor performance is symptomatic of a larger lull in renewables, as investment in clean energy dropped to its lowest levels since 2009. The CAI recognises that the short to medium term prospects for the global renewables sector will be challenging; as the Eurozone debt crisis intensifies and competition from Asian markets will continue to “focus the minds of European policy setters.”

However, the report remains overall very positive about the long-term outlook for the global renewable energy sector as technologies, such as solar; edge closer to grid-parity.

To complement the report Ernst & Young commissioned a global survey of one hundred US$1 billion-plus companies operating within energy-intensive sectors. The results reveal that 38 percent of respondents expect energy costs to rise by 15 percent or more over the next five years. Respondents indicated that increased usage of renewable energy and energy efficiency measures will be the largest drivers of corporate energy mix discussions in the future.

Warren comments: “While company-owned generation clean energy is low, 68 percent of respondents purchase some amount of electricity generated from renewable sources. However only 39 percent of all respondents would be willing to pay a premium for renewables, highlighting the importance of achieving grid parity and developing innovative project financing models.

Warren concluded: “The main barriers to self-generation and renewables adoption are mainly related to risk and financial return. This suggests that adoption could come even faster with financing innovations and increasing cost-competitiveness of renewables. Only those businesses with a comprehensive and diverse energy strategy will be able to create and maintain competitive advantage in the resource-constrained world of today.”