The UK's ability to meet its renewable energy and climate change commitments is under threat because the country is failing to attract the necessary investment, according to the CBI.
To successfully move to low-carbon energy generation, the sector needs £150 billion of funding over the next 20 years, but investors are being put off by a perception of regulatory risk, says the CBI in its latest report, Risky business: Investing in the UK’s low-carbon infrastructure.
“We need the government to set a clear direction of travel and to stick to it,” said Katja Hall, the CBI’s chief policy director.
“It is particularly important that the planning system delivers timely decisions and there are no more sudden policy shifts as we saw with the Carbon Reduction Commitment Energy Efficiency scheme.”
The CBI research reveals that businesses and investors believe conditions in the UK are “less attractive than elsewhere” and this, it claims, is proving to be a “significant barrier” to successful investment in renewable energy and green technology.
Recent research from the Carbon Trust confirmed that 29% of cleantech companies see the lack of access to finance, due to a risk-adverse investment climate, as the main obstacle to their expansion.
To win over investors, the government needs to develop a long-term strategy for green growth, deliver certainty in its reform of the electricity market and ensure that the localism Bill does not hinder energy infrastructure projects, recommends the CBI.
However, Charles Anglin, director of communications at wind and marine energy association RenewableUK, argues that the government does appreciate the industry’s need for a stable policy framework.
Citing the crucial impact the electricity market reform will have on investor confidence, he said: “There are risks associated with change, but we believe the government is getting it right so far.”
Richard Nourse, joint managing partner of renewable sector investment firm Novusmodus, went as far as to say that the CBI was focusing on the wrong problems entirely. “The key issue is how to deliver lower carbon emissions, rather than ensuring a certain level of renewable energy generation. The challenge is to [make a] transition to a low-carbon economy at the lowest possible cost. When we achieve that we will ensure that UK industry is competitive.
“The CBI needs to focus on getting its members to work efficiently to abate carbon at the lowest possible cost. It should also be challenging the government on the UK’s commitment to producing 15% of its energy renewably by 2020, rather than calling on it to do things that it is already doing or are, quite frankly, some way from being the main issues.”
Nourse’s comments echo the Renewable Energy Foundation’s (REF) sentiments when it confirmed in April that the UK had missed its 2010 target to generate 10% of electricity from renewable sources.
“The counterproductive target-led renewable policy agenda to 2020 has reached the end of the road, and should be replaced with a more feasible and reasoned strategy,” said Dr John Constable, REF’s director of policy and research.
Despite REF’s comments and the CBI’s concerns, many companies within the sector are feeling positive, according to figures from the Carbon Trust.
In March, 77% of cleantech firms surveyed confirmed they were planning to recruit staff over the next 12 months and 37% said they were hoping to move into new export markets within two years.
Most also said that the UK was a “good country” for them to be located in, with many citing government support as a major strength.
