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Sunday 19 November 2017
19 November 2017 - NEWS UPDATE
Renewable Energy

REA survey shows low confidence in renewables sector

The REA's first ever survey of renewable energy sector confidence has revealed a disappointing score of 47%. The Association developed the confidence index to capture the outlook for the renewables industry in relation to turnover, new business and employment, as well as relevant regulatory regimes and confidence in the UK meeting its 15% renewable energy target by 2020.

REA-chart

Source: Eurostat

A maximum score for all questions would give an index of 100% and the REA believes that a score of at least 75% is required for the UK to have good prospects of meeting its 2020 target.

The initial score of 47% therefore falls short and clearly demonstrates the industry's current lack of confidence in the Government's programmes and policies being able to deliver the scale of investment and growth needed to meet the mandatory 2020 renewable energy targets, claims the REA.

Renewable energy consumption must grow annually by 16% to 2020 for the UK to achieve its 15% target.

REA Chief Executive Gaynor Hartnell said: "We will repeat this survey every six months in order to build up a comprehensive picture showing trends in confidence levels. Billions of pounds of investment needs to flow into renewables infrastructure. Our aim is to provide Government and stakeholders with a tool to gauge how policies are being received.

She added that the UK has to achieve a higher growth rate than any other EU member state in order to reach its 2020 renewables target.

"Mixed messages remain a problem and industry needs policy certainty and political consistency. The prize is up to 400,000 jobs by 2020, economic growth and greatly improved energy security."

The survey takes place at a time of major policy upheaval for the renewable power and renewable transport sectors and follows several analyses suggesting that investment in the renewables project pipeline has slowed.

Senior managers from 68 companies responded to the survey. Findings confirm the Energy Bill is cause for concern with 51% of renewables executives believing that Contracts for Difference will not be effective in bringing forward new renewable power capacity, 69% believe that the lack of an emissions target in the Energy Bill sends a 'poor' or 'very poor' signal to investors, and only 4% believe the UK has a 'good' or 'excellent' chance of meeting its 2020 renewable energy target.

However, the survey shows no significant overall deterioration in employment over the past six months. Just under a half of companies reported broadly stable employment levels and nearly as many firms recruited staff as have laid them off. Looking forward over the next six to twelve months 62% of companies expect employment levels to stay the same, and twice as many firms expect to see employment increasing, compared to those expecting a decrease in employment.

Key Findings:

* The Renewables Industry Confidence Index for Q1 2013 is 47%. A maximum score would be 100% and the REA considers that a score of at least 75% is required if the UK is to have good prospects of achieving its mandatory target of 15% renewable energy by 2020.

* 68% of respondents have poor or very poor confidence that the UK will achieve its 15% renewable energy target by 2020. Only 4% thought prospects of meeting the target were good or excellent.

* 69% think the lack of an emissions target within the Energy Bill sends a poor or very poor signal to investors. 9% felt this sent a fair signal and 4% a good signal.

* 51% of respondents active in the electricity sector have poor or very poor confidence that Con- tracts for Difference, as set out in the Energy Bill, will be effective in bringing forward renewables generation. 31% didn't know – the highest level of uncertainty, 13% rated their confidence as fair, while 4% responded good or excellent.

* There is a mixed response on the functioning of the key renewable energy incentive schemes, ranging from an average of poor (Renewable Heat Incentive) to fair (Feed-In Tariffs and Renew- ables Obligation).

* Business over the last 6 months has been hit by policy uncertainties but companies are more optimistic about increasing their turnover, new business and employment over the next 6-12 months.

* Despite policy uncertainties there has been no significant decrease in employment in the sector in the past 6 months and there is higher confidence that employment will increase rather than de- crease over the next 6-12 months.

* New business has increased in the past 6 months, and it is expected to increase further in the next 6-12 months.

The REA says the findings show that there is a level of business and employment stability in the UK renewable energy sector, and optimism going forwards. However, there are concerns about the complexity and efficacy of current policy mechanisms and about the Energy Bill in particular. Reluctance to set a decarbonisation target in 2014 sends a poor signal to investors and there is a marked lack of confidence that Contracts for Difference will be effective in bringing forward new capacity. There are further concerns about access to finance with only 13% of responses having good or excellent confidence in raising finance.

Craig Ibbetson, Director of Regen Energy, said: "Simplify the regulatory framework. It is too complex."

James Astor, Managing Director at Agrivert Biogas, said: "Recent Government actions mean that private equity and banks see Government renewable policy as a "risk" that has to be priced."

David Williams, Chief Executive at Eco2, stresses that this uncertainty goes back further than the past six months: "Investor confidence has deteriorated with the many changes in legislation seen in the UK over the last two years."

Tim Jackson, Geothermal Development Manager at Sinclair Knight Merz, said: "The UK is falling behind other countries in Europe and Africa in terms of attractiveness for investment in new renewable generating technologies."

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