Rowing back on green pledges is putting the future of the UK’s economy at risk for the benefit of “short-term political gain”, a top renewable investment fund has warned.
Tom Williams, a partner and head of energy and infrastructure at Downing Renewables and Infrastructure Trust, told City A.M. that delaying the arrival of low carbon electricity would sustain higher bills for customers dependent on gas, and undermine investor confidence in the UK.
“The impact of what they’re doing — which they know — is that they’re going to make people’s electricity bills more expensive in the future,” he said.
“The longer we take to do something about it, the more expensive those bills will be,” he added.
Williams warned that clean electricity and energy was “always going to be needed”, even if the message was getting lost “in the noise of some political manoeuvring at the moment, ahead of an election year”.
He said: “The government cannot do it by itself. It needs investors to do it. It knows it needs private investment to do it. So, it always is going to need to create an investment environment that attracts that capital.”
He feared the more the government chop and change and reverse policy positions around net zero, the more investors will perceive the UK as a “less attractive place to invest” as it competes for capital from across the world.
This included Downing’s own position in the UK renewables market — contrasting the country’s formerly “rock-steady policy” with the current approach where policies were “changing every few months”, which was “unsettling the investment environment”.
“There’s only one answer to that, if you speak to any investor in any sector,” he said.
City A.M. has approached the government for comment.
The government recently announced plans to delay the phasing out of fossil-fuel powered electric vehicles and heating solutions, while it has also been criticised for failing to provide sufficient funding to lure renewable investments – with the latest round for offshore wind projects failing to attract major bids.
There are also concerns its plans to lift onshore wind out of a de facto moratorium have not gone far enough, and that there has been insufficient support for solar farms.
Prime Minister Rishi Sunak has aimed to draw a dividing line between his party and Labour with environmental policy, arguing that he is pushing for a “proportionate” approach to net zero in contrast to the opposition’s more radical targets.
This comes with the Conservatives still over 20 points behind in the polls, but the country split on the speed of rolling out net zero measures.
Nevertheless, he has reiterated his support for reaching net zero over the next three decades and also maintained the target of decarbonising the electricity grid by 2035, while the energy security strategy includes ambitious goals such as reaching 70GW of solar generation over the same time period.
Despite Williams’s concerns over the UK’s investment climate, he welcomed Brookfield’s decision this week to snap up Banks Renewables in a reported £830m deal — taking on a vast pipeline of wind, solar and battery assets in the country.
Williams argued this was “a strong signal that there is good international investor appetite for the renewable energy projects in this country”.
Downing is also still pushing to back UK projects, including this year’s £11m acquisition of Mersey Reactive Power, a UK-based shunt reactor, or power transformer, that increases energy efficiency.
Downing pushes back against share price slide
Downing invests in renewables projects across the UK and Sweden, with a near 50:50 split in both markets for its £217m portfolio.
Its focus in the UK is chiefly in the solar industry — which makes up 47 per cent of its overall portfolio — and in the hydro space in Sweden, and that is about 42 per cent of its holdings.
The company’s share price has nosedived 24 per cent this year, falling from 114.5p per share in January to 87p per share.
It is now trading a more than 20 per cent discount on the FTSE All-Share.
Williams argued that the performance of the company’s underlying assets remains robust, and that instead it reflected current investor sentiment — which is that renewable trusts are less attractive than “lower risk” options such as government bonds in challenging economic conditions.
This was affecting the entire sector — including rivals — with sharp interest rate hikes has dampening activity.
With the Bank of England recently holding rates, Williams was hopeful there was a pathway for improved investor sentiment towards renewable funds.
He said: “Perhaps people are starting to think more ‘Are there any rate more rate rises to come? Or are we now at a peak of interest rates? Maybe we can start to see in the future them coming down again?’ When that starts to happen, our sector generally starts to look more attractive — particularly at the discounts people are trading at.”