At the end of 2017, power started flowing through the Western Link project, National Grid’s billion-pound joint venture with Scottish Power Transmission, which will eventually bring renewable energy from Scotland to homes and businesses in England and Wales. That’s in addition to plans that will see the installation of 50 high-power charging stations across the UK, sufficient to position anyone within 50-mile reach of a charge spot. Across the pond, the group has also signed contracts to provide battery storage energy systems for the Long Island Power Authority and the Philadelphia Navy Yard. Indeed, the nominally UK-based utility has allocated more than half of its spending into projects in the north-east of the US, where state authorities are encouraging multi-billion-dollar investments in low-carbon infrastructure projects.
The example provided by National Grid is by no means unique, but certainly indicative of the step-up in capital allocations across the corporate sphere. Even Drax (DRAX), hardly a name synonymous with clean energy, is set to launch a new carbon-capture storage project – supposedly the first of its kind in Europe – at its North Yorkshire power station.
Aggregate data from Bloomberg New Energy Finance (BNEF) show that global investment in renewable energy and energy-smart technologies hit $334bn in 2017, up 3 per cent from a revised $325bn in 2016. That represents the second-highest annual investment in clean energy, with just under half of the total attributable to the solar sector, which saw an 18 per cent year-on-year increase largely on the back of increased investment activity in China, although there were marked increases from Mexico and Australia – countries where the potential for solar generation is obvious.
The year 2015 provided the high-water mark, with aggregate global investment of $360bn, although it is worth noting that solar system costs for utilities per megawatt (MW) have fallen by around a quarter since then. At the turn of the decade, most industry analysts, let alone investors, would have scoffed at the notion that renewable energy generators would have become commercially viable over the medium term without heavy subsidies in place, but they’re holding their own, even in the UK where subsidies for installing residential solar panels have been cut by 65 per cent.
And there’s certainly evidence to suggest that increased investor interest in the sector is justified. New research from Imperial College’s Business School shows that UK companies that own renewable energy projects (the so-called UK Yieldcos) delivered an annual rate of return of 8.1 per cent over a three-year period with relatively low levels of volatility.
Investors seem able to envisage a mixed power grid for the UK, but the government, as ever, seems more concerned with political expediency, pandering to the concerns of some marginal consistencies in the Home Counties and elsewhere. Imperial College also pointed out that from January to March this year, wind power outproduced nuclear for the first time ever. Wind-powered electricity accounted for 15 per cent of domestic generation last year – up from less than 3 per cent in 2010.
And yet, Theresa May’s government has not only removed subsidies from new onshore wind projects at a time when unit costs are narrowing appreciably, but a recently published report from the Parliament’s Environmental Audit Committee (EAC) indicates that the government’s sale of the Green Investment Bank last August has contributed to a fall in renewables investment, with capital inflows to clean energy falling to their lowest level in 10 years.
