Growing Concern for UK Wind Energy Investment
Recent changes to onshore wind policy frameworks have hugely impacted investment confidence in renewable energy. The UK Government’s Energy Bill dated 9th July 2015 saw the New Secretary of State for Energy and Climate Change, Amber Rudd, announce plans to close the Renewables Obligation for new onshore wind from April 2016. Rudd argued that cutting the financial support period short for onshore wind technology will allow a shift in funds to alternative forms of renewable energy that require more support for example tidal.
For the last five years Raconteur has produced RenewableUK’s annual survey on industry confidence. The latest edition, UK Wind & Marine Energy Business Barometer 2015, underlines the entwining of policy and investment confidence and growth. 73 per cent of wind energy respondents felt that renewable energy is less favourable in the UK than it has been in the last eighteen months and only 31 per cent expressed a potential for increasing investment. The changes in policy have created instability and concern leading to speculation of a political attack by the Conservative Government on the onshore wind sector.
The Government needs to make a genuine commitment to decarbonisation, rather than simply playing gesture politics
Prior to the last Energy Bill, onshore wind was subsidised through three separate schemes; Contracts for Difference (CfDs), Renewables Obligation (RO) and Feed-in Tariffs. The latest Energy Bill could well result in higher energy bills due to the UK’s standing commitments to renewable energy and decarbonisation under the Climate Change Act. By 2050, the UK’s target is to reach 80 per cent decarbonisation from the levels experienced in 1990.
A report by think tank IPPR shows strong evidence to suggest that on-shore wind technology is in fact the cheapest low-carbon power source in the UK. Ruling out growth in this type of renewable energy could cost an extra £3 billion as the cost of achieving climate change and clean energy targets could increase exponentially with the use of alternate technologies.
The UK is the global leader in offshore wind but stakeholders are concerned about the country’s future prospects. The long term impact of the bill is yet to be felt to its full effect however it is clear that stability and confidence about the long term is vital not only for the growth of the onshore industry but also to attract investment.
Maria McCaffery, Chief Executive of RenewableUK explains that for the industry to reassure investors, “The Government needs to make a genuine commitment to decarbonisation, rather than simply playing gesture politics; it needs to commit to effective technology competition under the CfD; it needs to clarify its commitment to a future Levy Control Framework; it needs to support evidence-based planning; and finally it needs to provide transparency on support mechanisms and costs. Only by doing this can the industry and the international investment community find certainty within the UK market.”
The 2015 Barometer saw a significant majority of respondents that held the belief that the investment climate has deteriorated over the last 18 months and that this would impact their businesses with a fall in investment.
Cutting the Renewables Obligation scheme early sends a worrying signal about the stability of the UK’s energy policy framework
Last year, 50 per cent of respondents were looking forward to growth through increased investment however in 2015 that number almost halved. What’s even more disconcerting is that 41 per cent of respondents are expecting to see a decrease in investment over the coming year.
CBI’s deputy director-Katja Hall cautioned, “Cutting the Renewables Obligation scheme early sends a worrying signal about the stability of the UK’s energy policy framework”. The 2015 Energy Bill gives investors cause for concern and since capital can be invested anywhere in the world, changes to policy could turn investors off investing in all types of renewable energy.
When asked to rate whether Government policy has become more or less favourable over the last 18 months, 89 per cent of respondents were of the opinion that it had become less favourable compared to 79 per cent in 2014.
The 2015 Barometer has shown widespread anxiety about energy across the board and one respondent described the changes to the policy environment as “tragic”. A fifth of respondents prioritise return on investment (ROI) and certainty/ confidence as the biggest incentive for development and the unreliability of Government support could thus hugely impact investment. One respondent even said that there was now no incentive for development in the UK.
The general public however believes that wind subsidies are 14 times higher than actual figures according to a OnePoll survey from March 2015. The general estimate was that £259 was subsidised per £1,300 household dual-fuel bill whereas in reality the subsidy was only £18. The survey also showed that the public underestimate the support for wind with 90 per cent of respondents believing that approval ratings for wind were around 40 per cent when the real figure is 70 per cent.
Maria McCaffery, chief executive of Renewables UK explained, “This suggests that the loud voices of a small minority, too often perpetuated by negative rhetoric, are trying to distort the facts.” She underlined that the Government needs to understand that support for wind remains high and if one form of energy is treated differently to others then this could lead to a ripple effect across the energy industry. Fairness remained at the core of her recipe for success for the future of all types of energy technology.
The outlook for recruitment is largely positive as 71 per cent of respondents expressed an intention to grow or indeed maintain staff levels over the next 18 months. Less positive however was the fact that only 39 per cent of respondents expect to increase employee levels over the next year and a half showing a continual falling in numbers. In fact, the overall majority of respondents expect to take on fewer than ten members of staff.
Whilst there was a slight increase in the hiring of young workers, the renewable energy sector is one that requires a wide range of skills including mechanical, electronic and IT skills and this continually proves to be a difficulty as more training is required in order to reduce costs and maintain a strong talent pool. Of the stakeholders surveyed, only three per cent see an abundance of interview candidates with a wide range of skills.
In order to attract young talent, future employees must see a clear indication of growth in the renewable energy sector however the Business Barometer revealed that policy changes have created uncertainty. A stronger forecasting capacity is required to support increased employment but this is of course dependent on Government policy.
Currently in the UK, the wind industry employs 18,500 people and supports another 16,000 jobs. If the industry continues to grow, an additional 50,000 to 70,000 jobs and 55,000 indirect jobs could be created.
Chief Executive of RenewableUK Maria McCaffery commented “If we want to see real enduring benefit, we need manufacturing in the UK.” The wind industry has seen steps in this direction with Siemens announcing its offshore wind manufacturing facility in Hull. However all things considered, investment is dependent on the belief in the potential for growth and Government Policy is certainly not doing the UK any favours in this department.
About the survey
This market study was conducted by Raconteur for RenewableUK. It is based on the responses to a web-based survey among members of RenewableUK, the trade association for the wind, wave and tidal energy sectors. A total of 180 responses were received.
The companies that responded to this survey covered a broad spectrum of the industry in terms of both their size and their main areas of activity.