The UK government’s renewable energy cuts will have a negative impact on the sector in the short term, but decreasing costs mean it will continue to grow in the long term, says a report by GlobalData.
The government’s recent decision to remove renewable energy sources from Climate Change Levy (CCL) exemption will generate around £490 million by 2016 and up to £1 billion per year by 2020, but it will have a negative impact on the sector in the short term. However, according to Prasad Tanikella, GlobalData’s Senior Analyst covering Power, decreasing costs means that the sector will continue to grow in the long-term.
“In the short term, the government’s latest move to phase out the Renewables Obligation and impose CCL on renewables will certainly discourage investment in the sector” Mr Tanikella said. “However, it is expected that ending the levy exemption will generate around £490 million during 2015-2016 for the government, increasing to £1 billion in 2020-2021.”
Mr Tanikella added that the UK wind sector will be the worst affected, although the new measures will not have a substantially detrimental impact on offshore wind installation, which GlobalData has forecast to reach 23.2 Gigawatts (GW) by 2025. UK wind power currently has a pipeline of over 43 GW, around 12.5 GW of which is onshore and the remainder is offshore wind. Over 1 GW of offshore wind power is expected to come online this year with an expected future addition of 1 GW per year over the next five years.
The government’s decision to abruptly discontinue subsidies will dent investor confidence and slow down investments in the industry, the report concludes.