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Quick Look: Renewable Energy Development in the UK

Developers, manufacturers, investors and other renewable energy industry stakeholders need to know where the next big market is going to be so that they can adjust their business decisions accordingly.

Since 2003, global consultancy Ernst & Young has released its Country Attractiveness Indices, which gives a numerical ranking to 30 global renewable energy markets by scoring renewable energy investment strategies and resource availability. The indices are updated on a quarterly basis and the most recent report can be found here.

Here is the firm’s assessment of the UK.


The UK Government recently announced the results of its Comprehensive Spending Review (CSR), unveiling £83b (€97.4b, US $129.8b) of spending cuts in a bid to reduce the country’s record budget deficit. Renewable energy, however, came out broadly unscathed, and even secured additional investment. The Government has pledged £2.2b (€2.5b, US $3.4b) for clean energy projects to ensure the UK meets its target of 15% of energy from renewables by 2020.

This includes £1b (€1.1b, US $1.5b) to capitalize the Green Investment Bank, and while less than the £4-£6b (€4.6-€7b, US $6.2b-9.3b) called for by industry, it remains a positive sign given the current climate. Another £1b (€1.1b, US $1.5b) will be spent on a carbon capture and storage demonstration plant, with the remaining £200m (€234m, US $311.3) awarded to offshore wind developments.

The CSR also left current FIT rates unchanged until the next formal review in 2012, a significant relief to the solar sector in particular, which has been significantly boosted by the recently introduced incentives. It was also announced that FITs will be refocused on the most cost-effective technologies at the next review, unless higher than expected deployment requires an early review.

There is some concern, therefore, whether the solar industry will be able to compete on cost with other technologies within such a short period of time, or whether high uptake will trigger an early review leading to degression.

It was also announced in Q3 that the Government has lifted a ban, in place for the last 34 years, which prevented local authorities (LA) selling surplus renewable electricity back to the grid. Significant scope exists to install projects on local authority land and buildings, and it is hoped the removal of the ban will allow LAs to generate additional income and take full advantage of the FIT available for small-scale renewables.


UK energy regulator, Ofgem, has introduced a “Revenue, Incentives, Innovation and Outputs” (RIIO) model to encourage the £32b (€37b) of investment required to update the transmission system. This upgrade is required to facilitate the UK’s movement to a low-carbon economy and new sources of energy generation. The RIIO moves away from the previous inflation-tied controls to an incentive-driven approach that rewards more efficient companies, as well as saving consumers an estimated £1b (€1.1b, US $1.5b).

Offshore wind

The CSR included a commitment to invest £200m (€232m, US $311.3m) in the development of offshore wind power, including a £60m (€70m, US $93.4m) investment to upgrade British ports to make them suitable for handling large offshore turbines required for Round three projects. This is a positive sign for turbine manufactures such as Siemens, General Electric and Mitsubishi, who indicated their investment in the UK was conditional on a ports upgrade. In September, it was confirmed that the UK’s total installed offshore wind capacity has now reached 5GW.

The EIB has announced that it is considering a £650m (€763m, US $1.01b) loan to help fund the 504MW Greater Gabbard offshore wind farm being developed by RWE and SSE. If it goes ahead, this will be the fifth such loan to a UK offshore facility this year alone and it is hoped that the EIB’s lending will provide some confidence to commercial lenders.


The generous FIT introduced in April has resulted in a boom in the installation of small-scale renewable energy generators, especially rooftop PV. More than 25MW has been installed since April compared with a total PV installed capacity of just 32MW at the end of 2009. August saw a record 2,200 UK household installations, while DECC estimates a total of 750,000 PV installations by 2020.

Following the CSR, Solar PV tariff levels will remain at current levels through 2011-12 and will then be reduced as planned by 9%. The next formal review in 2012 will set out rates for 2013 and beyond, although this may be earlier if deployment levels remain high.


Biomass investment in the UK is subject to further delays because the level of Government subsidies on offer for the plants is not certain until the next RO banding review. Meanwhile, the Scottish Government has proposed not to grandfather Renewables Obligation Certificates (ROCs) for dedicated biomass plants in Scotland.


After much speculation, the Government finally confirmed in October that the proposed Severn tidal barrage, costing an estimated £30b (€35.2b, US $46.7b), has been scrapped in favor of nuclear power.

For more information on renewable energy development in the UK, contact the report’s author Ben Warren.


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Volume 18, Issue 4


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