Government ministers continue to eulogize about the potential of UK renewable energy. New policy documents have proliferated and ever more ambitious targets are being set. What remains short, though, is adequate finance for renewables investment, which remains uncomfortably dependent upon the six integrated energy suppliers and on the monopoly grid operator, National Grid.
For some years now, these six players have dominated UK electricity generation. EdF, and the two German companies – E.On and RWE - are the leading players in England, along with Centrica. North of the border, Iberdrola, the owner of ScottishPower, and Scottish and Southern Energy (SSE), which owns many old – and fully depreciated - hydro-plants, prevail.
Since the net debt levels of most of these companies have soared over the last two years, there are now more financial constraints on their investment programmes. Importantly, EdF’s investment focus is on new nuclear-build. And, whilst E.On remains committed to heavy renewables investment overall, much of it will be in the US. Moreover, Centrica’s strong interest in renewables has been diluted by the recent fall in gas prices. But Scottish renewables investment remains robust with both Iberdrola and SSE, along with Sweden’s Vattenfall, continuing to support new wind projects there.
Securing grid connections also remains a serious problem, especially in developing offshore wind plants. This scenario is not helped either by National Grid’s net debt currently exceeding £22 billion. In terms of renewable technologies, only onshore wind – with a few exceptions – has made real progress to date in the UK, especially in Scotland where planning requirements are less restrictive. Offshore wind offers some prospects, along with biomass plants, which the Government has been trying to develop.
The key issue remains. Will the six integrated energy companies deliver the required renewables investment, given the many attractive investment opportunities beyond the UK - notwithstanding their own deteriorating finances?