Ernst & Young has criticised the UK’s energy policy environment, saying that the ‘over-hyped’ energy bill has failed to meet the investor market’s requirements.
The company’s latest quarterly Renewable Energy Country Attractiveness Indices (CAI) has revealed that, despite concerns over the Energy Bill, the UK has retained its position as the 6th most attractive market for renewables. China remained at the top of the table ahead of Germany, USA, India and France respectively.
Commenting on the UK’s position, Ben Warren, Ernst & Young’s Environmental Finance Leader said: “A series of delays, some very public political squabbling and the over-hyped ‘once in a generation chance’ to reform the UK’s energy market has failed to meet the sector’s expectations. Although the Bill is still welcomed, it is now seen as a framework with long term commitments, rather than a transformative piece of legislation.
“The main source of disappointment for investors was confirmation that a decarbonisation target will not be set until 2016. This delay cast doubts over the UK’s commitment to cut carbon emissions 50% by 2027 and left investors with a sense of uncertainty.
“In addition, the Chancellor’s planned tax breaks for shale gas exploration and his new Gas Strategy have caused widespread concern. While the promise of low cost gas cannot be ignored, environmental groups and businesses are sceptical that a gas boom similar to the one witnessed in the US can be replicated in the UK. Instead, the technology should be used as an interim measure to sustain energy supply levels while the cost of renewables continues to fall.
“One of the few new proposals has been to exempt energy-intensive industries from the levies imposed on suppliers, and subsequently consumers, to fund the cost of CFDs. However, failure to publish details of the actual 2013-18 guaranteed CFD strike prices for each technology until later in the year, has continued to frustrate developers and dampen investor enthusiasm.”
For the second year running, solar represented the biggest proportion of new investment in renewables even though spending dropped by 9% to US$142.5 billion. Ernst & Young is predicting that larger solar manufacturers will continue to absorb smaller or distressed firms throughout 2013 as the market continues to adjust to oversupply, falling prices and trade protectionism measures across the global PV market.