Current UK Government policy priorities appear to be more focused on short-term political imperatives, leading to increased investment uncertainty, according to a new report.
The Energy Transition Readiness Index (ETRI) 2023, produced by the REA (the Association for Renewable Energy and Clean Technology), argued that investors will be attracted to the UK’s energy transition only if they can see patterns of clear governance and regulatory stability emerging.
At present, the signals are simply not strong enough, according to the report.
The analysis, sponsored by Eaton and Foresight Group, assesses and compares the electricity markets in 14 European countries.
The report finds that the UK has risen slightly in the overall rankings since last year’s report, sitting in front of countries such as Germany, Italy, and Switzerland.
However, it is lagging behind European countries which have flexibility markets that better deliver fair, transparent, and simple access.
The best way that countries can achieve high levels of flexibility is by encouraging investment in what are known as demand-side response capabilities such as energy storage, the report states.
Open markets for flexibility are another critical requirement, and although flexibility markets are developing in the UK, progress is by no means sufficiently extensive or fast enough, it adds.
Overall, respondents to the survey that underpins the report considered that progress towards the energy transition in the UK would accelerate faster if equivalent measures to the US Inflation Reduction Act had been introduced.
The REA reiterates that the long-term financial impact of slowing the energy transition will be severe.
Frank Gordon, director of policy at the REA, said: “It is welcome that the UK has some of the most ambitious decarbonisation goals, however UK policy must shift away from prioritising the short term, if we are to meet these targets and increase investment certainty.
“Furthermore, with a 132TWh clean energy generation ambition by 2030, this considerable growth will need to be accompanied by comparable growth in flexibility resources.
“If these renewable and flexibility resources are not available, then UK decarbonisation targets may not be met, leading to higher costs to consumers.
“During last year’s publication of ETRI 2022, we welcomed the Government’s warm rhetoric but called for significant action.
“This year we reiterate the urgent need for action, but do not have the luxury of such Government warm words.
“Recent rolling back on some green policies in the UK has seen a decline in both public and political confidence regarding the energy transition as illustrated in the report.
“Significant action from the Government to remove the barriers facing our industry is essential: proper long-term planning; prioritising and accelerating market reforms; and urgently addressing current investment barriers – all are desperately needed to help put the UK on the right path.
“The REA continues to urge all political parties to pull the levers to accelerate the UK’s energy transition readiness. With the right policy and regulatory environment, the Government can ensure that we do not fall behind.”