Regen’s director, Johnny Gowdy highlights the clear alignment heard from industry today regarding UK investment and steps to mitigate the negative impact of the Electricity Generator Levy (EGL)
Two reports have been published today by energy trade associations – Renewable UK’s ‘Retaining the UKs leadership in renewables’ and Energy UK’s more prophetic ‘Storms Approaching: How to prevent an investment hiatus in UK low-carbon generation’.
Regen has also sent a letter today to the Treasury and the Department for Energy Security and Net Zero (DESNZ) on the subject of support for UK investment and steps to mitigate the negative impact of the Electricity Generator Levy (EGL).
The two reports and Regen’s letter are very closely aligned, both in their analysis of the investment challenge and their recommendations to enable the UK to capitalise on its net zero leadership position and avoid an investment hiatus.
The UK has a fantastic opportunity to push ahead with its net zero transition, creating jobs, growth and export opportunities across the clean energy sector, as identified by the Chris Skidmore review. At the moment, however, that investment faces a potential hiatus and is at risk of falling behind both our net zero and energy security targets and other markets in the US and EU.
Some of the investment headwind is global but the main issues relate to our domestic policies and challenges:
| International challenges: | UK-specific challenges: |
|---|---|
| Increased competition for capital, technology leadership and talent from US and EU markets | Barriers in planning |
| Increased costs of capital and higher investment risk | Grid connection delays and need for additional network capacity |
| Rapidly rising supply chain costs including key commodities and OEM costs | Stop-start policies and the lack of an overall net zero delivery plan |
| Negative impacts of the Electricity Generator Levy | |
| Supply chain and infrastructure constraints including ports, heat pump engineers | |
| Rigidity of our policy support measures including budgets and prices for Contracts for Difference (CfD) allocations | |
| Regulatory and policy uncertainty including high-risk market restructuring like Locational Marginal Pricing |
The recommendations also follow similar themes. These include:
- Publish an overall delivery plan to back up the energy security and net zero strategy;
- Streamline planning for low carbon and infrastructure investment;
- Massively accelerate new network capacity;
- Mitigate the impacts of the EGL by introducing higher capital allowances for low carbon investments;
- Expanding the use of CfDs to ensure consumers benefit from lower cost renewables but also ensuring the CfD scheme supports sustainable investment and builds UK infrastructure and supply chains;
- Shift focus of market reform towards evolutionary and targeted reform, such as simplifying network charging, and quickly rule out flawed measures like Locational Marginal Pricing (LMP) which would kill investment.
The industry may still be speaking with different voices, but they are essentially saying the same thing. That is important. Let’s hope that the Treasury and DESNZ, and indeed all political parties, are listening.
Blog by Johnny Gowdy, Director at Regen. For more information and comments you can reach Johnny at jgowdy@regen.co.uk.