U.K. deliberations on changes to the electricity market designed to spur spending on low-carbon power generation have contributed to a 50% drop in funding for renewables, according to industry researcher Bloomberg New Energy Finance.
The CHART OF THE DAY shows how funding from loans, equity or company balance sheets for large-scale projects declined 53 percent to $5.04 billion last year from $10.65 billion in 2009, according to data compiled by London-based New Energy Finance. The researcher records investments when they are signed.
The government outlined plans for an overhaul in March 2010 after regulator Ofgem began a consultation in October. The U.K. published proposals in December 2010 and Energy Secretary Ed Davey on Nov. 23 set out measures for an energy bill that will be published this month. Davey was forced to drop a target to cut power-industry emissions after Chancellor of the Exchequer George Osborne resisted the goal, which Areva SA and Siemens AG had said was necessary to prevent investments being stalled.
“Investors have made clear to the U.K. government that policy uncertainty has undermined investment,” said New Energy Finance analyst Nico Tyabji. While Davey’s announcement irons out a “big ticket item” on how contracts between generators and power suppliers will be arranged, political divisions have been adding to concerns for investors already struggling with regional economic and financial crises, Tyabji said.
“No wonder investors were getting spooked: The U.K. seems to have developed a split personality,” he said. “Coalition infighting was an unhelpful backdrop for once-in-a-generation reforms to the electricity market. A 2030 decarbonisation target, though not essential, could have helped the government reassure investors by demonstrating some consistency.”