- Government needs to create a market framework within which the private sector can develop this industry to attract investment -
- UK should look towards successful European incentive mechanisms -
- Environmental taxes should be linked to environmental and renewable energy projects -

A survey of renewable energy professionals, conducted by Deloitte, the business advisory firm, has highlighted opportunities available for the renewable energy industry apparent from record deal activity. It also examines barriers to be overcome, including government policy.

Jenny Harrison, Deloitte director responsible for the renewable energy assurance practice, said: “There is enormous potential for the renewable energy industry and the conversion of these opportunities into reality is key. Technical capabilities, financial strength and management of scale are just some of the elements necessary to making renewable energy a viable option.

“Providing long-term investor certainty should increase the UK's credibility in this sector and attract globally mobile investors. Appetite for scale and market share has led to record M&A activity across the sector but supply chain constraints will have an impact on opportunities.”

The renewable energy industry saw record figures in M & A activity in 2007 and the total value of deal activity in the clean energy sector increased by 47% to $55.7 billion (New Energy Finance).

Government policy was identified by over a third (35%) of survey respondents as the key barrier to the development of additional renewable energy generation capacity in the UK. Respondents felt the UK government should focus its efforts on carbon pricing (27%), and demand management initiatives (26%) in order to develop the UK renewable energy industry. Respondents felt there was a real need to address both the demand and supply side of the energy equation.

The UK government’s environmental taxes were not considered to be encouraging investment in the renewable energy industry.  Over half of the survey respondents (57%) felt that the current package of environmental taxes did not encourage or discouraged investment. Environmental taxes fell from 3.4% to 2.7% of GDP between 1997 – 2006.

Roman Webber, head of renewable energy at Deloitte commented: “There continues to be no sign of linking environmental tax revenues raised by government to environmental or renewable energy projects. If this decision was taken, it would lead to a considerable step forward for the renewable energy industry.”

Robin Cohen, Deloitte Partner commenting on energy regulation and incentive mechanisms, said: “The Government has a significant task ahead to try to create the right incentive environment to attract globally mobile investors to the UK.

“For examples of successful incentive mechanisms we can look to Europe where the rate of increase in renewable energy has been highest in countries that operate feed-in tariffs. The UK has tried to operate the Renewable Obligation, although a market-based mechanism on top of an already risky market has posed a considerable challenge for investors.

“If a mechanism was implemented which accounts for the full cost of carbon emissions for fossil fuels, this would make the market function more effectively in favour of investment in renewable energy.

“In order for the UK to reach the 2020 emissions target a raft of measures needs to be put in place involving government intervention and consumer support for carbon reduction measures.”

Read more and download the full report: Renewable energy seminar - May 2008

Ends

About the survey
The second Deloitte Renewable survey analysed the responses of 39 renewables professionals. The survey was conducted on 8 May 2008 at the annual Deloitte Renewables seminar in London.

About Deloitte
In this press release references to Deloitte are references to Deloitte & Touche LLP which is among the country’s leading professional services firms, providing audit, tax, consulting and corporate finance services. Deloitte & Touche LLP is the United Kingdom member firm of Deloitte Touche Tohmatsu (‘DTT’), a Swiss Verein whose member firms are separate and independent legal entities.  Neither DTT nor any of its member firms has any liability for each other’s omissions.  Services are provided by member firms or their subsidiaries and not by DTT.  Deloitte & Touche LLP is authorised and regulated by the Financial Services Authority.  The information contained in this press release is correct at the time of going to press.