Green energy cuts 'may deter investment in nuclear and fracking'

Investors in nuclear power and shale gas could be deterred by the Government’s recent attacks on renewable energy, which lack "any rationale or clear intent", consultancy EY has warned.

Britain has slipped out of EY's top 10 rankings of countries’ attractiveness to investors in renewables for the first time, following a series of policy changes to reduce support to onshore wind and solar technologies.

The UK is now rated 11th, down three places from the group's last quarterly report, and now lags behind Brazil, Chile and the Netherlands.

EY, formerly known as Ernst & Young, claimed the plethora of UK policy announcements in the last three months had not only seen its attractiveness to renewables “plummet” but could also have a knock-on effect on appetite to invest in other parts of the energy sector.

Ben Warren, energy corporate finance leader at EY, said: “Investors are currently trying to make sense of what seems to be policy-making in a vacuum, lacking any rationale or clear intent.

“Worryingly, this trend of inconsistent policy tinkering could also sour investor confidence in other areas, such as new nuclear, carbon capture and storage (CCS) and shale gas, as well as offshore wind.”

Since forming a majority Government – regaining control of the formerly Lib-Dem led Department of Energy and Climate Change - the Conservatives have announced the curtailment of subsidies for onshore wind and small-scale solar farms as well as plans to drastically cut subsidies for rooftop solar panels.

The Chancellor also unexpectedly ended renewable technologies’ exemption from the Climate Change Levy – a policy that had effectively resulted in another subsidy payment to green generators.

EY said that so far this year 23 large-scale projects with a combined capacity of about 2.7 gigawatts had been publicly abandoned, “putting a question mark over the long-term future for the UK’s renewable sector”.

Changes to support for onshore wind were “jeopardising the sector’s competitiveness,” it said.

Mr Warren said onshore wind and rooftop solar were likely to be “cost-competitive and subsidy-free within the next three to five years” but that “by prematurely withdrawing support, the Government risks stalling or killing projects that would otherwise maintain the momentum to get the market to that critical point”.

A DECC spokesman said: "Government support has driven down the cost of renewable energy significantly, making it more cost effective for investors. However, we are taking urgent action to get a grip of renewables spending in order to protect hard working families and businesses and keep their bills as low as possible.

“The UK still remains an attractive location for investment in energy and we have continued to be the global leader in offshore wind investment.