The UK Sustainable Investment and Finance Association (UKSIF), which brings together 300-plus members managing over £19tn in global assets under management (AUM), has released a report showing 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, it found failing to implement new favourable policies could see the UK fail to benefit from a potential £115bn of investment waiting to be unlocked for the country’s energy sector.
UKSIF said its 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 its true potential for sustainable economic growth.
As part of the research, the trade body polled 100 business decision-makers across the UK sector, representing £700bn in turnover, on their views about the current opportunities and challenges of decarbonising the energy system.
Nearly nine in 10 (87%) respondents agreed changes to policy are essential to make the country an attractive investment location for green energy. Moreover, 81% of large UK energy companies agree it 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 future energy infrastructure. They are: Overhauling planning rules to remove obstacles and reduce the time taken to bring large energy projects online; Ensuring there is adequate grid capacity to reduce connection times; Reforming energy pricing mechanisms to incentivise long-term investment in UK low carbon power capacity, including the Contracts for Difference auction process to better support supply chain investment.
“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,” said UKSIF chief executive James Alexander (pictured).
“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.
“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,” said Energy UK chief executive Emma Pinchbeck.
“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 eighth 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 £240bn – by 2050, roughly equivalent to the current size of our manufacturing sector.”
RenewableUK’s director of strategic communications Nathan Bennett added: “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.”
Director of policy for the Association for Renewable Energy and Clean Technology Frank Gordon said: “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.”