International investors cooling on UK energy assets?


Global appetite for UK energy assets appears to be cooling, as investors hunt more favourable regimes for low carbon growth, according to a poll of investment decision makers at 2,000 corporations worldwide by law firm Ashurst.

Researchers found 88 per cent of firms have altered their clean energy investment plans over the past year, positioning for a post-coronavirus recovery and in response to changing technology economics.

“The lack of commercial incentives or economic benefits rank high on the list of investor barriers in Germany, Japan and the United Kingdom, with lack of government support seen as a significant barrier”, the report notes.

While praising contracts for difference in spurring UK clean investment, Ashurst’s researchers note solar and onshore wind were excluded from bidding until March this year.

UK investors said that initial capital (34 per cent), transaction costs (33 per cent), lack of commercial incentives (32 per cent) and technical risk (32 per cent) were the biggest barriers to investing in the energy transition, though Ashurst noted that recent policy changes were likely to address some of those aspects.

Globally, solar is the technology most favoured by the report’s respondents. Researchers note its predictable returns, ease of deployment and plummeting costs. Some 54 per cent of respondents have already funded PV projects, and a further 24 per cent are likely to do so in the next five years, says the report.

While the majority of UK businesses back the low carbon transition, the poll suggests they are collectively less convinced than international counterparts regarding its criticality.

Asked if embracing the energy transition was ‘essential’ to their futures, 73 per cent of British businesses agreed, significantly lower than businesses in France (85 per cent), Germany (81 per cent) and Italy (88 per cent). That response ranked the UK only 16th out of the G20 nations and behind Indonesia and Argentina.

Some 86 per cent of respondents from large businesses – with at least US$50 million turnover and 250 employees – believe investing in clean energy is essential to their growth. 71 per cent of smaller companies agree.

Respondents identify North America, the Middle East and South America as the world’s current hotspots for clean energy investment. Over the next five years, the suggest North Africa and South East Asia will join them.

Read the report here.

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