Energy Bill falls short of expectations
27 Feb 2013
Ernst & Young believes UK energy price hikes have cast doubt over support for renewables
Three months after its publication, the Government’s Energy Bill has not managed to meet the investor community’s high expectations.
This is according to Ernst & Young’s latest quarterly global Renewable Energy Country Attractiveness Indices (CAI) published.
The indices score 40 countries on the attractiveness of their renewable energy markets, energy infrastructure and suitability for individual technologies.
During Q4 2012, China remained at the top of the All Renewables Index (ARI) and Japan moved up one place because of its current strong support for renewables, putting the country ahead of Canada and only one place behind the UK.
Ben Warren, Ernst & Young’s Environmental Finance Leader said: “A series of delays, some very public political squabbling and the over-hyped “once in a generation chance” to reform the UK’s energy market has failed to meet the sector’s expectations.
“Although the Bill is still welcomed, it is now seen as a framework with long term commitments, rather than a transformative piece of legislation.
He added that the main source of disappointment for investors was confirmation that a decarbonisation target will not be set until 2016.
This delay cast doubts over the UK’s commitment to cut carbon emissions 50% by 2027 and left investors with a sense of uncertainty.
“In addition, the Chancellor’s planned tax breaks for shale gas exploration and his new Gas Strategy have caused widespread concern,” he said.
“While the promise of low cost gas cannot be ignored, environmental groups and businesses are sceptical that a gas boom similar to the one witnessed in the US can be replicated in the UK. Instead, the technology should be used as an interim measure to sustain energy supply levels while the cost of renewables continues to fall.”
One of the few new proposals has been to exempt energy-intensive industries from the levies imposed on suppliers, and subsequently consumers, to fund the cost of Contracts for Difference (CFD).
However, Ernst & Young claims failure to publish details of the actual 2013-18 guaranteed CFD strike prices for each technology until later in the year, has continued to frustrate developers and dampen investor enthusiasm.
In response to another consultation concerning biomass schemes, the Government has introduced a cap of 400MW that will trigger the option to hold a consultation on further biomass deployment.
The sector has welcomed this “wait and see” approach, as a mandatory cap could otherwise stop investment in its tracks should it be breached.
It was also confirmed that the new build dedicated biomass projects subject to this trigger cap will receive 1.5ROCs/MWh in 2013–16, falling to 1.4ROCs in 2016. DECC expects the announcements to unlock investment decisions worth at least £600m (€731m).
