Since the UK government pledged to hit a target of net zero carbon emissions by 2050 and Ofgem revealed its plans to decarbonise the economy, the UK renewable energy industry has grown ever more important.
The year 2019 saw public concern on the issue of climate change reach a new high which encouraged the uptake of renewable power. It is difficult to know how effective climate campaigners such as Greta Thunberg and Extinction Rebellion were in bringing about the change in people’s attitudes, but it definitely increased the discussion on how the UK can clean up its act. It remains to be seen whether public support will continue with Ofgem and the government setting out plans to replace all gas heating by 2035 and to ban the sale of diesel, petrol, and hybrid cars. The cost of achieving these aims will be extremely high and where the money comes from to fund such plans will be key to winning the public’s support.
When the Coronavirus pandemic broke there were fears that the inevitable economic recession would halt efforts to develop green renewable energy and the move towards a carbon neutral future. However, the Coronavirus pandemic has only served to highlight the need to replace fossil fuels with renewable energy.
Nathan Bennett of RenewableUK said:
“The climate emergency has not gone away. If anything, the Covid-19 pandemic has underlined the need to make sure our economy is sustainable and resilient in the long term.”
The year 2020 will go down in history as the point when the long-awaited energy transition to a low-carbon future went from being a topic of debate to something far more tangible. The world-wide lockdown dramatically reduced the demand for oil and gas but provided a big boost for renewables. The sharp drop in fuel prices as the crisis unfolded made renewable energy companies more competitive with ever-falling renewables prices.
Fossil fuel companies are turning towards wind and solar in a big way after seeing oil futures dropping below zero in April this year.
More and more companies are looking for a way to enter the renewable energy market as companies race to develop and invent new technologies. Realistically, in order to hit the targets proposed by the government innovation and new technologies are needed.
Competition between energy suppliers to attract new customers has escalated as each one introduces their own form of ‘green tariffs’.
Ofgem has been putting a stop to so called ‘greenwashing’ which is where a company exaggerates the amount of their energy supply that comes from renewable sources. This is likely to force suppliers to increase their use of genuine renewable sources. Those energy suppliers that provide the best value green tariffs will most likely gain a competitive edge over their rivals. We can expect to see more energy suppliers being introduced and advertised in future months and years.
The government’s push for installing an extra 10 million electric vehicles on the UK’s roads and for introducing electric heating into millions of homes will lead to a huge demand for electricity that will put immense pressure on an already struggling energy grid. Companies are recognising the need for new technology that can handle these demands and pouring large sums of cash into research and development projects.
If the government’s plans are to come to fruition more renewable energy sources such as offshore wind farms and hydroelectric plants will have to be developed and infrastructure built. This means that the renewables sector will see an increase in jobs and opportunities for businesses.
The investment plans mapped out by Scottish Power and other renewable energy giants have remained intact through the pandemic.
The big utilities and oil super majors are establishing their place in offshore wind bringing funds to capital intensive projects. Fossil fuel super majors are repurposing some of the infrastructure needed on flagships and offshore cranes.
The UK needs to generate an extra 100GW of electricity to hit the 2050 net zero carbon target according to the National Grid with overall energy demand climbing to 491 terawatt-hours. Huge investment in renewables is required to do this and we are seeing investment starting to rise this year.
Wind energy is leading the renewable energy market in the UK as the most cost-effective way of power generation. Huge market opportunities are available for the wind energy market companies. The UK government is aiming to reach 20,000 MW by the end of 2030 and there are already several ambitious projects in the development phase.
Scottish Power is currently investing billions in the UK’s renewable energy industry, including an onshore wind renaissance after the government’s U-turn on blocking financial support for onshore turbines.
Today, much of the risk that was borne by renewable energy investors a decade ago has fallen away alongside plummeting technology costs. The UK’s commitment to pursuing a carbon-neutral economy by 2050 as well as its established financial support frameworks offer greater certainty to willing investors than in the past.
The investment case for renewables is made further attractive by investment opportunities elsewhere being in the doldrums. Fossil fuels no longer hold the appeal they once did for a growing number of investors due to climate concerns and the collapse of global market prices for oil, gas, and coal during the Coronavirus pandemic.
According to Bloomberg Intelligence, oil investors, at one time, could rely on returns on equity of about 25% when prices hovered at $100 a barrel but this fell dramatically during lockdown. The returns on equity invested in offshore wind was 11%, and for solar it was 8% despite falling electricity bills at that time.
Fatih Birol, executive director at the International Energy Agency, has asked the government to devise stimulus plans that put the green energy agenda at the heart of the economic recovery.
Keith Anderson, chief executive of Scottish Power said that there was not a moment to lose:
“This is our message to the government: now is the time to do it. Investors are very keen to push money this way, and into these projects. The UK has a fantastic opportunity to grab a huge slice of the world’s renewable energy investment today. Now is the time.”
The Renewable Energy industry is expected to continue to expand over the next five years, with further policy support driving the consumption and generation of renewable energy. A projected fall in the cost of renewable technologies is anticipated to decrease the cost of renewables for consumers, further supporting output. Companies such as Tesco, Google and Whitbread have committed to increase their renewable electricity usage, reinforcing demand from the commercial sector.
Economists believe that the hard-won financial standing of the renewable energy industry together with public policy support could create a powerful enough force for the economy and employment to expedite the UK’s post-pandemic recovery while tackling the climate crisis too.