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New UK renewables confidence report reflects a sector under pressure

The UK Renewable Energy Association has published its first ever industry confidence survey, finding "modest optimism" in the short term, but some doubts over key policies.

The ‘Renewables Industry Confidence Index’ score for this first iteration of the survey is 47% (the REA estimates that a score of 75% would indicate a healthy industry with a good chance of reaching its 2020 renewables target).

The survey takes place at a time of major policy upheaval for the renewable power and renewable transport sectors and follows several analyses suggesting that investment in the renewables project pipeline has slowed (source - Bloomberg New Energy Finance, November 2012). recent media reports have also highlighted the concerns of REA members responding to the survey, about the new Contracts-for-Difference mechanism under the Energy Bill.

Senior managers from 68 companies responded to the survey. Findings confirm the Energy Bill is cause for concern with 51% of renewables executives believing that Contracts for Difference will not be effective in bringing forward new renewable power capacity. 69% believe that the lack of an emissions target in the Energy Bill sends a ‘poor’ or ‘very poor’ signal to investors. Only 4% believe the UK has a ‘good’ or ‘excellent’ chance of meeting its 2020 renewable energy target.

However, the survey shows no significant overall deterioration in employment over the past six months. Just under a half of companies reported broadly stable employment levels and nearly as many firms recruited staff as have laid them off. Looking forward over the next six to twelve months 62% of companies expect employment levels to stay the same, and twice as many firms expect to see employment increasing, compared to those expecting a decrease in employment.

REA Chief Executive Gaynor Hartnell said, "billions of pounds of investment needs to flow into renewables infrastructure. Our aim is to provide Government and stakeholders with a tool to gauge how policies are being received.

“The UK has to achieve a higher growth rate than any other Member State in order to reach its 2020 renewables target. Mixed messages remain a problem and industry needs policy certainty and political consistency. The prize is up to 400,000 jobs by 2020, economic growth and greatly improved energy security.”

About the Renewables Industry Confidence Index

The REA has combined short term business outlook with confidence in meeting the 2020 target and confidence in the regulatory framework to give an overall ‘Renewables Industry Confidence Index’.

The ‘Renewables Industry Confidence Index’ score for this first iteration of the survey is 47%.

While 100% would constitute absolute certainty and a flourishing industry, we believe a score of around 75% would indicate a healthy and confident industry likely to meet the 2020 renewable energy targets. The UK has one of the lowest renewable energy targets in Europe at 15% of total energy, but also one of the most challenging given our low starting point.

The survey reveals serious concerns around Contracts for Difference, as set out in the Energy Bill, and dissatisfaction with the functioning of the Renewable Heat Incentive. It also makes key recommendations for improving investment going forward, including sending a clear signal to investors; ensuring CfD proposals in the Energy Bill work for independent generators; setting an RTFO trajectory to 2020; and introducing new RHI tariffs on time.
 

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