Martin Pickard, investment director at Low Carbon discusses the growing momentum behind investment into renewable energy projects at home and oversees
The news has been awash with headlines regarding fluctuating oil prices and the post-Brexit economy. On paper, you would be forgiven for thinking it’s harder than ever to embark on new international business ventures or attract foreign investment into the UK. But this needn’t be the case.
At Low Carbon we are seeing a rich opportunity to expand our portfolio into new areas, such as combined heat and power (CHP) and energy storage, and are noticing a trend for energy companies to identity development opportunities in the UK and abroad.
We believe that the UK renewable energy sector as whole is strongly placed to identify new development opportunities to strengthen the UK’s energy security and footprint in this sector
Opportunities in the wake of oil price volatility
Not a day seems to have gone by in 2016 without oil’s unpredictable and volatile share price being reported. One moment, investors will read that Brent oil prices have fallen for fourth consecutive session against a strong US dollar. The next, they will see that oil prices are spiking. What is for certain here is that institutional investors in the UK should consider new opportunities, investing into innovative renewable energy projects and new developments to see a strong return on investment.
Renewable energy projects such as utility-scale solar, energy storage and wind have a strong proven track record of improving the UK’s overall energy mix, whilst meeting the UK’s energy needs. Investment into climate change solutions in the UK or abroad can stand up to financial scrutiny. They are typically inflation-linked and long term. The vast majority of renewable energy projects are infrastructure projects. If a positive investment climate in this area is created, this could inspire the next generation of developers to really propel their projects forward, safer in the knowledge that investment is coming their way.
Renewable energy in emerging markets
Whilst the UK has a healthy footprint in the renewable energy sector, energy companies today can look to strengthen their portfolios by looking to overseas opportunities. Investment into emerging markets need not be seen as a detriment to UK renewables. Working in different emerging markets can harness strong growth opportunities in developments such as solar and onshore wind.
It was recently reported, for example, that China is looking to expand its 120GW of wind capacity by a further 20GW in 2016. This is coupled with a government backed ambition to develop 350GW of hydro by 2020. Another emerging market to watch is India. The country recently attracted $14 billion in renewable energy investment in 3 years. Wind energy is the central driver for investment in this area. Wherever you look, it’s clear that appetite and investment for renewable energy is gathering apace.
There are also development projects out there which are designed with the prime purpose of feeding back to Europe including the UK grid. The TuNur flagship solar project in the Tunisian Sahara for example, will send clean energy back to Europe via a dedicated cable. Further investment into such overseas projects can offer the cost-effective and scalable solutions to enhance the overall UK energy mix.
The opportunities are clearly there. One thing that is important to note is that the merits of the project can often also spur investment decisions, not the location of the project itself.
‘Open for business’ What more can be done to strengthen the UK energy sector?
With such rich opportunities out there, what more could be done to spur investors and developers into working collaboratively to strengthen the UK energy sector? A stable policy environment can play a strong part here.
Germany is a beacon of best practice. Their stable investment climate has created a shift to an auction scheme for solar where capacity deployment accelerates. Furthermore, long term policy certainty has been provided through the Energiewende movement. A similar approach in the UK could see uncertainty reduced and projects will be more likely to grow and succeed.
In our increasingly global economy, a state of fluctuation in oil prices and domestic policy shifts, there is still potential to look for renewable energy investment opportunities at home and abroad. The key for energy companies is to identify the most innovative and lucrative projects that can attract investors but also help to mitigate the negative effects of climate change.
With support from government, we hope to see a collaborative approach between energy companies, developers and investors to really propel the UK energy market forward and to strengthen this by realising the potential of opportunities oversees. It’s the way forward.