The UK has fallen to 13th position in the Ernst & Young (EY) Renewable Energy Country Attractiveness Index (RECAI), which was updated in May. The report ranks the 40 most attractive markets for renewable investment, and in the latest report, the top three spots were taken by the United States, China, and India. The US is forecast to see an additional 41GW of wind capacity and 56GW of solar in the lead-up to 2021.
The methodology used for the index has recently been revised to reflect the fact that renewable energy is starting to move beyond a reliance on subsidies and is heading towards grid parity, which can be described as a point when the cost of renewables generation is competitive with other forms of generation. The refreshed index takes into account factors such as government policy, grid infrastructure, and the investment stability of the individual country.
The latest report shows that emerging markets are climbing up the index, displacing European countries that have traditionally led the way. The UK fell to 13th place having been ranked 5th in 2013. It started to lose position in 2015 as renewable support was cancelled or cut and the government changed policy direction to focus on nuclear generation and shale gas. The RECAI report stated “The UK Government’s noncommittal, if not antagonistic, approach to energy policy continues to go against the grain of almost universal global support for renewables.” The Department of Energy and Climate Change would argue that it is seeking a lower cost solution to decarbonisation. The cost of renewable subsidies and low-carbon support is passed through to energy bills and, as it stands today, non-energy costs make up around 50-60% of an I&C power bill and are expected to rise. However, uncertainty prevails over the government’s policy direction, and associated costs, of nuclear power and shale gas.
The upcoming referendum on the UK’s membership of the EU is creating investor uncertainty in the short term, which will impact renewables projects. However, in the longer term there are developments that will encourage renewables investment in the UK. Reports such as the REA Decentralised Energy Report point to continued advances in technology that enable power to be stored on the grid. Battery storage would encourage investment in renewables as it solves the biggest problem of wind and solar generation, its intermittency. Although battery storage is in its infancy in the UK, this is expected to change quickly as costs reduce and incentives are put in place by the National Grid. The introduction of battery storage has long been seen as a game changer in the move towards a low-carbon economy because it enables renewable generation to be stored and released at times of higher demand, thereby reducing reliance on backup thermal generation and so reducing costs.
The RECAI report includes a feature on grid parity, which outlines expectations that countries where grid parity is expected to be reached first are those that are rich in a renewable resource and have high energy prices. Deutsche Bank has predicted that Australia is likely to be the first country to reach grid parity for domestic customers, as early as 2017. Meanwhile, energy companies in Spain are confident that the Spanish solar industry will reach grid parity over the next few years, as energy prices rise. The full report can be read here.