Two Thirds of UK Energy Companies Consider Moving Investments Abroad

The UK Sustainable Investment and Finance Association (UKSIF), which brings together 300+ members managing over £19 trillion in global assets under management (AUM), has this week released a report showing that 63% of UK energy companies have moved, or plan to move, investments out of the UK to a market more supportive of their sustainability goals. Furthermore, failing to implement new favourable policies could see the UK fail to benefit from a potential £115 billion of investment which is waiting to be unlocked for the UK energy sector.

The UKSIF Financing the Future: Energy Report is the first in a four-part series of research and policy papers calling for a series of practical and cost-effective policy reforms required to unlock greater investment for the UK’s highest carbon-emitting sectors and fulfil the UK’s true potential for sustainable economic growth.

As part of the research, UKSIF polled 100 business decision makers across the UK energy sector, representing £700bn in turnover, on their views about the current opportunities and challenges of decarbonising the UK energy system. Nearly nine in ten (87%) of UK energy businesses agreed that changes to UK policy are essential to make the UK an attractive investment location for green energy.  Moreover, 81% of large UK energy companies agree that the UK is falling behind other countries in the race to become the most investible market for low-carbon energy.

Within the report, UKSIF has identified three key measures required to facilitate greater investment and faster delivery of the UK’s future energy infrastructure, including:

1. Overhaul planning rules to remove obstacles and reduce the time taken to bring large energy projects online
Streamlining the consenting process and shortening decision timelines could lead to 40% of energy companies increasing their investment in sustainable energy in the UK.

2. Ensure there is adequate grid capacity to reduce connection times
Enabling the regulator to permit greater private sector investment will help rapidly build out the grid and associated infrastructure, allowing a greater number of low carbon projects to be invested in and connected.

3. Reform energy pricing mechanisms to incentivise long-term investment in UK low carbon power capacity, including the Contracts for Difference (CfD) auction process to better support UK supply chain investment
Reforming the parameters of CfD auctions will not only boost investment into the UK, but also ensure that renewable energy supply chains are scaled up significantly – as will be required – to meet renewable deployment targets in the late 2020s and 2030s.

James Alexander, CEO at UKSIF comments: 
“An international race is underway between countries to become the most investible market for green energy and, currently, the UK is taking its leading position for granted. Multiple decades of arcane and archaic planning rules are putting the UK energy transition in great jeopardy. This report highlights the abundance of private capital that is waiting to be deployed to close the funding gap and help accelerate the UK’s energy transition, with companies clearly showing that they are willing to take this investment elsewhere if policy does not evolve.

“We are calling for practical and cost-effective measures that will advance the transition to a green economy and bring direct benefits to both consumers and the UK economy. Not only do we see no excuses not to accelerate these, failure to do so limits the UK’s growth potential, will continue to cause costs to consumers and threatens the UK’s position as a world leader in green finance and the undisputed financier of the net zero transition.”

The call for evolved policy measures has been echoed by organisations and businesses across the UK  energy sector such as Energy UK, RenewableUK and The Association for Renewable Energy and  Clean Technology. 

Emma Pinchbeck, CEO at Energy UK: 
“Reaching Net Zero will require an estimated five-fold increase in current investment levels by 2030 – and around two-thirds of this will come from the private sector. This will only happen if investors have the confidence and the right environment to justify committing funding to the UK over the long term. 

"The UK can rightly point to becoming the first country in the G7 to halve its emissions, mainly driven by the way we generate our electricity. We cannot rest on past achievements however and, as it stands, the UK is forecast to have the slowest growth in low-carbon electricity generation of the world’s eight largest economies between now and the end of the decade.

“We need to match the levels of ambitions set by our targets and unlocking private capital is the way to do that, while also bringing benefits to the whole economy. Analysis has shown that the most ambitious approach to Net Zero could boost the UK’s GDP by 6.4% - or £240 billion - by 2050, roughly equivalent to the current size of our manufacturing sector."

Nathan Bennett, Director of Strategic Communications at RenewableUK: 
“This report is spot-on in identifying three of the major barriers to the UK maximising investment in renewable energy and securing our fair share of the manufacturing facilities to deliver them. The UK’s planning system and consenting rules urgently need to be streamlined and shortened, with timeframes for decision-making set out clearly and proper resourcing provided for planning authorities. It currently takes longer to get consent for an offshore wind farm than it does to build it. Similarly, our electricity grid badly needs an upgrade or we’ll continue to see renewable energy projects which could be generating low cost power for billpayers held back, in many instances into the next decade.”

Frank Gordon, Director of Policy for the Association for Renewable Energy and Clean Technology: 
“The UKSIF Financing the Future: Energy Report emphasises some of the key issues being faced by renewable developers, which are ultimately slowing the ability of private capital to enter the UK energy market. Delays in getting planning permission or a sensible grid connection date are making projects unfinanceable and ultimately slowing the UK’s ability to build an affordable, secure and decarbonised energy system. We therefore particularly welcome the call for more resources for planning teams and regulators to do their job and reduce delays as a result..”

By Liza Hartley, UKSIF