Bioenergy Infrastructure Group's Hamish McPherson laments a 'dramatic and worrying' collapse in low-carbon energy investment.
The UK is a low-carbon leader. We are the largest producer of offshore wind power in the world, while biomass output has increased almost 10-fold since 2011 and now supplies 20 per cent of the UK's renewable energy. In addition, more than 900,000 homes have solar panels and there are more than 160,000 electric cars on the nation's roads up from just 3,500 five years ago. The proportion of our electricity generated from low-carbon sources doubled between 2009 and 2017 and we are already halfway through our commitment to cut greenhouse gas emissions by 80 per cent by 2050 compared to 1990 levels. Long before then, and possibly as early as 2025, the UK's energy mix is expected to be completely coal-free.
Yet growth is not inevitable, nor can it be taken for granted.
Following a period of sustained growth, annual investment in clean energy has shrunk 60 per cent since 2015, from £26bn to £10bn, and is now at its lowest level since 2008. The UK (£4bn) also lags leading economies such as France (£41bn) and Germany (£25bn) on the issuance of green bonds. In a report published earlier this year, the Environmental Audit Committee described the drop as a "dramatic and worrying collapse" in investment, with MPs blaming changes to low-carbon energy policy in 2015 for undermining investor confidence and leading to a reduction in the number of projects in development.
This is hopefully a temporary dip rather than a secular shift and the impact of these declines has been cushioned by efficiency and technological gains that have cut the cost of generating electricity from renewables - in other words, we are now producing more with less - and there remains a strong pipeline of new projects. To take one example, we are bringing online a waste wood biomass plant in Ince, Cheshire, our second largest facility in the UK, which forms part of a clean energy hub in the North-West of England that promises to deliver over 3,000 jobs and a £350m annual boost to the local economy.
However, more still needs to be done to ensure a diverse energy supply. The recent heatwaves fuelled a solar surge, with solar power providing over 25 per cent of the UK's energy needs on some days, but wind turbines frequently were left standing still. The government's Clean Growth Strategy, launched late last year, seeks to revive growth in investment, but even the government's own adviser, the Committee on Climate Change, thinks the strategy may well fail unless it is "interpreted generously" and delivered in full.
Institutional investors are attracted to projects that have advanced to the late-stage construction or operation phase, whereas securing investment earlier in a project can be more challenging. The vote to leave the EU led to a sharp fall in financing of UK projects by the European Investment Bank (EIB) from £5.5bn in 2016 to £1.9bn last year. Also disruptive was the protracted privatisation of the UK's Green Investment Bank (now Green Investment Group), which was finally sold to Macquarie Group last year for £2.3bn. The bank made 29 investments in 2015/16 but only six in 2017/18.
To stimulate growth and get projects off the ground, local councils need central government backing to mobilise investment and resources and, while securing the support of local communities will always be paramount, planning rules need to be applied fairly and consistently to ensure that good projects move forward.
Low carbon growth will increase the nation's productivity, create jobs and help protect the environment on which we all depend. We are a long way short of achieving that goal and need to mobilise large volumes of capital investment over the next few years to make it happen.
Source - UK Energy