Despite the broad economic doom brought on by the Brexit vote, the burgeoning UK wind power industry is a constant source of good news. However, the industry will still require governmental backing.
In the Brexit-related economic doom, the UK wind sector stands out, according to a new analysis.
According to the latest Finance Quarterly Q1 report from industry intelligence agency A Word About Wind, many UK wind projects are now on the verge of profitability, even without government subsidies, but political backing remains crucial to ensure their future success.
The study is the most recent research created particularly for the organization’s swiftly growing global membership of energy investors, financiers, and developers. It is released four times a year and offers information on significant mergers and acquisitions (M&A) transactions, information on the noteworthy agreements from the previous three months, economic nation projections, and investment analysis.
The UK market and its future course in a post-Brexit world are among the primary topics of the most recent issue. The UK’s wind industry was greatly unsettled as a result of the EU referendum and Brexit decision, and changes to the economic environment had an impact on both domestic investors and international companies looking to develop in the UK.
The devaluation of the pound, which has lost 22% of its value versus numerous other currencies since the referendum decision, was the direct result of the vote. Other effects stemming from this have been many. For instance, consumer price inflation has reached its highest level since 2012, which has led to an increase in interest rates. The Bank of England’s decision to increase its benchmark interest rate from 0.25 percent to 0.5 percent in November, the first increase in 10 years, serves as evidence of this. The UK economy would only increase by 1.5 percent in 2018, according to the International Monetary Fund, compared to a 2.1 percent average annual GDP growth during the previous five years.
The UK wind sector, however, is thriving. Despite the Brexit decision in June 2016, the UK completed the year with over 14 GW of built wind capacity, placing it third in Europe. The UK government’s political support of renewable energy sources has been a significant factor in this accomplishment.
Although the Conservative administration received harsh criticism for eliminating onshore wind subsidies in 2015 and UK Chancellor Philip Hammond has prohibited further renewable energy subsidies until after 2025, the government’s support for offshore wind has not changed.
In forthcoming Contract for Difference (CfD) auctions, which potentially support up to 10 GW of additional offshore wind power, the government’s Clean Growth Energy Strategy announced intentions to grant £557 million assistance for renewables. With the Secretary of State for Business, Energy, and Industrial Strategy, Greg Clark, and minister Claire Perry hinting that projects in Scotland and Wales might appear in a CfD auction without subsidies this spring, the future of onshore wind also appears bright.
Richard Heap, Editor of A Word About Wind, stated that “the UK government’s backing for renewables projects over the years has been vital to the industry’s development.” “While it is becoming clearer that initiatives may succeed without subsidies, political support is still essential. If the UK government is serious about making wind, especially offshore wind, a success story of Brexit, their backing will be crucial.
Mr. Heap said that more could be done by the government because the UK planning system continues to be a major barrier to the development of wind energy projects because it presently allows local councils to prohibit wind farms greater than 50 MW.
Adam Barber, Managing Director at the Company, a significant component of which is A Word About Wind, asserts that regulatory policy will ultimately make or destroy the sector. The planning system’s limitations must be eliminated for the industry to thrive.