Review of the UK renewable energy sector

Analysis on the health of the sector 2014 and beyond.

This report is essential reading for any business involved in, or considering participating in the UK renewable energy market. It provides relevant and reliable data on the health of the sector with a focus on deployment, investment and jobs.

While it highlights the success of the sector in attracting investment over the past four years, despite the difficulties created by the financial crisis, it also reveals that we have a two tier renewables market.  The vast majority of investment goes to renewable electricity assets, despite the fact that the UK has challenging targets for renewable heat and transport. 

Looking at where policy efforts have focussed over the past few years, the greatest emphasis has been on restructuring our electricity market support to introduce Contracts for Difference (“CfDs”) under the electricity market reform programme.  With this process in the final stages of enabling legislation, we now need to look to kick start the renewable heat market, if we are to have any prospect of achieving the 2020 renewable energy targets.

In total, there was an estimated £29.8bn of investment in the renewables sector during 2010-2013, with most of the investment in renewable electricity (£27.7bn).  In the renewable electricity sector, investments have mainly been focused on onshore wind (£6.9bn), offshore wind (£7.7bn), solar PV (£5.5bn) and biomass (£4.7bn).  The remaining investment was in renewable heat (£1.4bn invested during 2010-2012) and renewable transport (£0.7bn). 

Looking forward to the investment required in renewable electricity and heat to reach the UK’s 2020 targets (based on government’s deployment forecasts), electricity is expected to attract the main share of the capital, (£40.8bn) although the investment in renewable heat is also expected to increase in importance relative to historical levels (£23.6bn - primarily bioenergy (£20.1bn) and heat pumps (£3.5bn)).  Of the renewable electricity investment, this continues to be dominated by investment in offshore wind (£12bn) onshore wind (£8.1bn) and solar PV (£9bn).  Based on DECC modelling, investments are projected to peak in 2014 and thereafter decline in the run-up to 2020.

renewables-chart

Key messages:

  • From almost no investment before 2011, the UK is experiencing a small scale solar revolution with £5.7bn invested in the past 3 years and another £4.7bn of investment expected in the next 2 years.  With large scale solar (>5MW) included, solar investment of (£11.9bn) is expected to significantly outweigh onshore wind investment (£8.1bn) over the period to 2020 and is only marginally less than offshore wind at (£12.0bn).
  • Offshore wind remains the most important sector in terms of overall investment historically. In the period to 2020, the investment gap between offshore and onshore wind increases with offshore investment about 50% greater than onshore (£8.1bn).
  • By region, England (£19bn) and Scotland (£4.3bn) represent 94% of UK investment.  By technology, investment in England primarily comprised offshore wind, solar and biomass, whereas Scottish investment was predominantly onshore wind (85%).  Per capita, investment in Scotland was more than twice that in England and three times than in Northern Ireland and Wales.
  • Investment in renewable heat remains the biggest area of challenge.  Investment over the three years to 2012 averaged c.£0.5bn, however the scale up required to meet the 2020 targets requires an average annual investment rate of c.£ 3.0bn per year.  Much of this will depend on the success of the recently launched Renewable Heat Incentive (RHI) scheme for the domestic market.

Contact us

Ronan O'Regan

Director Utilities

Tel: +44 (0)7720 805683

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