Renewable energy sector will fail without urgent government action, trade bodies warn

Analysts say more must be done to create an investor-friendly environment

Little Cheyne Court Wind Farm, near Lydd, Kent. The UK's renewable energy sector is facing a perfect storm this year, experts have warned. PA

Britain's goal of being a global centre for renewable energy could be at risk if the government fails to create the right conditions to attract investment, two trade bodies at the centre of the industry have said.

Renewable UK and Energy UK have separately called on the government to make it easier and more profitable for investors looking to build wind and solar farms.

"The renewable energy sector is facing a perfect storm this year, with inflation squeezing out already tight profit margins, and fierce international competition for investment, skills and supply chains," said Renewable UK head of policy, Ana Musa.

"The US and the EU are in a race to offer incentives to clean energy investors and the UK cannot take its leadership position for granted."

Energy UK, which also represents non-renewable energy companies, said if nothing is done, Britain stands to lose out on £62 billion ($74.72 billion) in investment by the end of the decade.

As well as broader economic issues that affect investment choices, Energy UK said current windfall taxes on energy companies were "poorly designed" and favoured oil and gas producers.

"The UK is in increasing danger of undermining its own ambitions and failing to deliver on its commitments," said Emma Pinchbeck, chief executive of Energy UK.

"In many ways, the UK has led the way in the transition to clean energy — witness our world-leading offshore wind industry — but we risk squandering this position and driving the investment that we need elsewhere."

Volatile prices

The warnings come ahead of Chancellor Jeremy Hunt's budget next month.

A government representative said the UK had consistently attracted investment in renewables. "Since 2010, the UK has seen a more than 500 per cent increase in the amount of renewable electricity capacity connected to the grid, while through 'Contracts for Difference' we have awarded contracts totalling almost 27GW of new low-carbon capacity to date.

"We are consulting on reforms as part of the Review of Electricity Market Arrangements, including changes to the wholesale electricity market that would stop volatile gas prices setting the price of electricity produced by much cheaper renewables — cutting the cost of electricity for consumers in the long term and providing certainty for investors."