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CARDIFF, England, November 2, 2005
(Refocus Weekly)
Investors are becoming more positive towards
renewable energy, and have a keen interest in learning more about
green power technologies.
Renewable energy is attracting “significant attention” in the UK
investment community, with 46% reporting an increase in positive
perceptions over the past year, according to the second survey on
investors' attitudes towards renewables conducted by Gavin Anderson
& Company for the Department of Trade & Industry. The survey
concludes that the main reason cited for the growing optimism is the
continued commitment from government to support the renewables
industry, although this commitment and support is also seen by
investors as the highest potential for risk, with the potential for
change in public policy.
“The results of the latest survey are encouraging as they show there
is a very keen interest among investors to discover more about
renewable energy,” says Ken Cronin of Gavin Anderson. “A total of
88% of those surveyed said they were either ‘possibly’ or
‘definitely’ interested in the principle of investing in the sector,
so the potential is huge.”
Renewables accounted for 3.1% of total energy production in Britain
last year, and the government has set a target of 10% by 2010 to
safeguard energy supplies and the environment. It wants 15% of
energy to come from renewables by 2015.
“The UK now has a renewable energy policy that is at least
recognised by most investors,” the report concludes. “However it is
clear from the results of this survey that from this already good
base, there is still room for improvement.”
The general election and G8 summit of world leaders last year made
2004 a difficult year to convey the message, and “it is clear that
investors require more information and see government as a key
source,” the survey concludes. “This indistinct messaging clearly
has had an impact on investors’ belief that the government will
achieve the 2010 target, with almost two-thirds of those surveyed
stating they believe the targets will not be met.”
Communications to investors was seen as good, but many want more
frequent contact and the survey shows that investors view public
perception as key to investing in the future. While 84% of investors
expect wind power to become the most significant renewable
technology in Britain, others expect wave and tidal, as well as
hydroelectric and fuel cell/hydrogen, to gain in popularity.
“The renewables sector has a growing reputation with investors and
this survey highlights that positive and strengthening confidence,”
says energy minister Malcolm Wicks, who released the results at a
meeting of the British Wind Energy Association. The survey is a
follow-up to a survey done in early 2004, and some of questions in
the 2004 survey were repeated to assess how views had changed in the
17 months.
There was a marginal weakening of attitudes towards renewables, with
46% reporting their attitudes had become more positive, 22% saying
they were more negative, and 32% remaining unchanged. The
more-negative attitudes were based on the perception that renewables
are expensive and poor value for money, while others noted a lack of
marketing and little marketing activity, political factors
(including a perceived poor track record and lack of
decision-making) and environmental concerns of the general public on
the siting of windfarms.
“Wind power is a colossal waste of time and money and it is not
reliable so you have to back it up with fossil fuel generation,”
said one respondent. “I’m not certain that the very considerable
grants given to wind power are worth it when it’s never going to
help us meet the Kyoto target in any meaningful way.” The majority
remain interested, in principle, in investing in the renewables
sector, but the level of interest is marginally below the level of
2004 and, unlike that survey, a few investors now say that they are
not interested.
Among the key risks associated with investing in renewables were
political factors (34% expressed concerns about a lack of government
commitment and possible long-term changes after the next election)
while 28% saw subsidies as a short-term measure with no evidence of
commitment in the longer term. Others saw renewable energy
technology as still developing and a lack of regulation and
instability in the regulatory regime, while others cited concerns
about profitability.
Most investors were realistic about rates of return, with 80%
considering 10% to 20% as acceptable. A small minority (8%) would
require ROI’s of more than 30% and the same number wanted returns of
21% to 30%. Three-quarters said the rates are achievable, and 60%
say their acceptable level has not changed over the past two years,
while 24% have reduced their expectations and 12% have higher
expectations.
When asked about positive actions taken by government towards
renewables over the past year, 42% said nothing has been done or
could not specify any actions. Of the specific positive actions
mentioned, 24% cited more general marketing activity and a general
raising of awareness, while 10% noted the new renewables target of
15% by 2015.
Of negative actions mentioned by respondents, 10% cited general
inaction and a lack of decision-making and clarity in the
government’s strategy, while 8% said the review of the Renewable
Obligation produced uncertainty, and 6% said there was too much
emphasis on wind power and the same percentage said there was too
little support for solar energy.
Investors suggested that government must provide a range of fiscal
incentives including tax breaks and subsidies (suggested by 28%) and
acceleration of the planning process (22%). Other main suggestions
include a clear and consistent strategy (16%), improvement and
extension of the ROC regime (12%), covering more technologies than
just wind (10%), creating a stable and long-term regulatory regime
(8%), education of consumers (6%) and guarantees for technology
risks (6%).
Respondents were all institutional investors, banks, private equity
and investment houses, with interviews in a semi-structured format
to generate both numeric (quantitative) and in-depth (qualitative)
feedback.
Gavin Anderson & Company is a strategic communications
consultancies, with 13 offices around the world. It runs a dedicated
energy practice that advises companies on renewable energies.
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