The UK has fallen three places to seventh in EY’s biannual global ranking of the most the attractive places for investment in renewables.
The country also lost its top spot as the most desirable destination for offshore wind investment – falling to second behind the US – following the failure of the latest Contracts for Difference (CfD) auctions to attract any bids from offshore wind developers.
The overall top three was unchanged from the previous ranking, with the US in first, Germany in second and China in third. France moved up one place to fourth while Australia and India both overtook the UK to come in fifth and sixth respectively.
The UK most recently peaked in May 2022 when it came third behind the US and China. The last time it placed seventh in EY’s Renewable Energy Country Attractiveness Index (RECAI) was four years ago in November 2019.
RECAI chief editor Ben Warren said: “The UK’s recent challenges in the offshore wind sector echo a broader, global struggle. When auctioning contracts for offshore wind generation, governments need to reflect economic conditions in the design of the auction.
“Considering moving away from cost-only auction formats and incorporating non-price factors, such as environmental considerations and job creation, may entice developer interest and a rise in bids.
He continued: “For the UK’s overall attractiveness as a renewables destination, there must also be a concerted effort to speed-up the grid connection process. Current years-long waiting times are delaying the pace at which projects can begin generating power and revenue.
“Ultimately developers need to feel that prospective projects will offer a viable, timely return on investment if they’re to contribute capital to the UK’s clean energy infrastructure.”
Energy secretary Claire Coutinho is due to announce the parameters for next year’s CfD allocation round (AR6), including the administrative strike prices, this month.
The absence of offshore wind bids in AR5 came after the administrative strike price for the technology was set at just £44/MWh (2012 prices). This upper limit was down from £46/MWh in the previous auction round, despite developers warning that supply chain costs had increased significantly in the meantime as demonstrated by Vattenfall’s decision in June to abandon its Norfolk Boreas project.
The Energy and Climate Intelligence Unit (ECIU) has cautioned that a repeat of September’s botched offshore wind auction could leave the UK needing to import significantly more liquefied natural gas (LNG) than would otherwise be the case.
The think tank said there is currently around 8GW of offshore wind projects eligible to bid in AR6. According to its analysis, generating the same volume of power using gas turbines would require 80TWh of gas – the equivalent of almost half (48%) of all LNG currently imported into Britain each year from place like Qatar. It said falling gas production from the UK’s continental shelf, means most of this gas would need to be imported from abroad.
Jess Ralston, energy analyst at the ECIU, said: “Offshore wind farms stood in British waters can provide genuine energy independence for the UK, but the recent auction failure has left us ever more dependent on foreign gas. If the government repeats this failure, the UK may be more reliant on foreign gas imports. New North Sea licences are a distraction, with little new gas left in the basin and the price being set internationally anyway.
“If rumours of the government setting a higher contract price are true, these renewables are likely to be comparable or slightly cheaper than the predicted wholesale power price at the end of the decade.”