In the face of increasing global competition for investment, an energy crisis and an upcoming Spring Budget from a new Chancellor, RenewableUK has released a wide-ranging report on Retaining the UK’s leadership in renewables. The report outlines clear measures for Ministers to take forward, including 7 specific recommendations made in consultation with industry.
As the representatives of industry call for new measures to incentivise building much-needed new projects and with Labour increasingly creating a policy programme around green growth and investment, it’s time for urgent action from Government to respond to these new challenges - both economic and political.
At a time when the USA has set up a much more positive policy and regulatory environment for investors, the UK is continuing to develop policies which would increase uncertainty and dampen investment.
In an interview published in the Times yesterday, Minister GrantShappssaid that he understood the challenges which the USA’s Inflation Reduction Act (providing $393bn of subsidies) presents for attracting investment elsewhere.However, the Government must also understand the potential risk for missed opportunities for UK PLC. Mr Shapps highlights that the UK cannot go “toe-to-toe” with the US offer in terms of scale, but he highlights that as the UK is a world leader in offshore wind and other emerging technologies, there is significant existing ground to use as a springboard to accelerate growth in the sector.
The world-leading companies in the UK’s renewables industry agree – andwe need action from Government in the upcoming Budget. As such, our new report makes several recommendations to the Chancellor, including:
Set new tax incentives and reform capital allowances to support renewable energy investment: The UK Government should ensure our incentive structure remains competitive with the US and EU incentives by ensuring that the investment allowance regime offered to renewables is as clear and at least equivalent to that offered to oil and gas and announcing Capital Allowances as part of the Spring Budget, with improved rates for net zero and renewable energy-supportive infrastructure.
Setting sustainable prices for renewable electricity, starting with Contracts for Difference Auction Round 5: CfD auctions should be reformed to maximise the investment in projects, enable the development of the future renewables pipeline, and support supply chain investment. Due to inflation and supply chain constraints, costs have increased across all infrastructure projects; Government should recognise this within the parameters for upcoming auctions in order to maximise projects.
By ensuring a successful auction round this summer, the government would not only secure significant new and cheap renewable energy for the UK, but also give investor and supply chain confidence where it is needed most.Nobody wants a repeat of the failed Spanish auction which secured only 1% of the capacity the Spanish Government had targeted. There is still a chance for the Government to show the UK is still ahead of the game and listening closely to the needs of the industry.
In his interview, Minister Shapps outlines a positive vision for UK renewables, and rightly highlights the incredible success and size of our offshore wind industry. In hinting at ambitions beyond 50GW by 2030 – he “can already see 76GW in the pipeline” –the Minister is committing the government and offshore wind industry to a bigger and better future (which would surpass even Labour’s 60GW goals). However, in promising such growth in ambition, the government should be realistic and listen carefully to the warnings in this report.
Without increased built up of grid and port infrastructure, surpassing 50GW is still only an ambition at the end of a long road. Currently, some offshore wind farms are being granted leases which can’t get a grid connection for another decade. There are huge delays in planning, and although it only takes around 3 years to build an offshore wind farm, it currently takes about 3-5 years to move through the consenting phase. We need much bolder and faster action to meet our ambitions, and we recommend that Ministers:
Streamline the planning process and ensure planning authorities are adequately resourced, so that key infrastructure projects can move quickly through the planning system.
Speed up pace and scale of investment in the UK’s grid (transmission network) to enable new renewable projects to be delivered more rapidly: we need a new model of grid development which can rapidly upgrade where needed – this can be delivered in part by reforming the remit of Ofgem through an amendment to the Energy Bill.
Increase investment in key infrastructure such as ports through new mechanisms which unlock private investment, such as revenue guarantees: port infrastructure needs to develop to cope with the scale of delivery (and height) of new offshore wind turbines and emerging floating wind development. RenewableUK recommend complementary reforms developed to unlock further private investment, utilising bodies like the UK infrastructure Bank.
The government can lower energy bills, increase UK jobs across the UK and attract voters by showing their commitment to green energy growth. The Secretary of State points out that “the most successful economies in the world are the ones that have cheap energy prices” and by focusing on these recommendations, the UK can ensure faster investment and delivery of the cheapest new energy sources in the UK – not to mention the most popular!
To maintain the UK’s world leadership in renewables, the Secretary of State and the Chancellor should use the Spring Budget to implement rapid and ambitious reforms that will accelerate the pace of renewable energy development and investment. Our wind industry is a success story to be shouted about – particularly the UK’s world-leading offshore wind sector. With continued investment and careful policy planning, this can be replicated in floating wind, tidal, green hydrogen and other innovative technologies.Now is the time to for Government to act to support competitiveness in the UK market and secure the global opportunities renewables offer – without action the UK is at risk of falling further behind the US and the EU in the global race for investment.