KPMG Renewable Energy Report Not Too Great For UK

Just yesterday we were lamenting how even China, where Hu Jintao probably snuggles up to a lump of coal every night because he just loves it that much, has announced it’s investing $440bn in wind energy, while we get £525m, plus some promises about more nuclear and carbon capture. And now it seems that the private investment that Britain’s basing its post-carbon energy plans on might not even be particularly forthcoming. Did someone just say “sick man of Europe”?

In this report by KPMG, they outline their research into the renewable energy mergers and acquisitions market; they surveyed 200 senior executives from “power-generating businesses, renewable energy suppliers, energy distributors, oil and gas majors and financial investors”. And for the UK, the results aren’t that great. Only Malta and Luxembourg generate less renewable energy than us at the moment, but we’ve got the highest targets for 2020. And while Germany and Italy earmarked over $100bn in their financial stimulus programs for tackling climate change, we only managed $30bn. So we’re mostly hoping that private investment, the great third way, will want to set up chez Blighty. But investors would rather go elsewhere first.

The problem first of all is the fact that the UK is encouraging investment in sites and setting up wind farms from scratch, which is seen as too risky and massive an investment at the moment: “Assets actually generating electricity, rather than shares based on promises in the wind, are what investors are seeking”. In other words, investment in big capital projects is likely to happen only by being funded through a massive company that’s sold off assets and is cash rich, has amassed bargains and is milking revenue, or has the clout and willingness to take on a big loan. 70% of smaller companies surveyed said it was harder to secure financing at the moment.

And more generally, the UK just isn’t as attractive to investors as other parts of the world. 42% of respondents said they were going to invest in the US next year, 24% in India, and 22% in China, but only 13% of them said they’d be investing in the UK. Suddenly Darling’s assertion that we’re “the world leader in offshore wind power generation” seems like a poisoned chalice. Considering an offshore wind farm is much more expensive to set up than an onshore one, investors in the current climate are far less likely to invest in offshore, if they invest at all. The UK is going to have to get over its NIMBY attitude to onshore wind farms, or face a reluctance towards any investment at all.

Still, as Deutsche Bank’s Brett Olsher notes in the FT: “In the UK, we’ve alreadt seen high levels of M&A activity in the nuclear energy space. This is where the development has been, and will continue to be in the medium term.” So at least Miliband’s beloved nuclear plants might get built, if nothing else.

Posted by Ben Beaumont-Thomas in Green Rush | May 27, 2009 1:45PM |