An Introduction to the UK Market

This week, we have published our first Finance Quarterly of 2018.

In this series of reports, we provide you with up-to-date deals data from the last three months, plus market analysis. This edition features a special focus on the UK market: alongside an in-depth analysis of the country’s wind sector, we have interviews with Boralex’s Patrick Lemaire, Nordex’s Rich Furniss and RES Group’s Ivor Catto.

We decided to focus on the UK for this edition as the country is facing a period of economic and political unpredictability. Its future after Brexit remains uncertain, and this inevitably affects the wind market – but the market has reasons for optimism.

The situation for offshore wind, in particular, looks promising. It has received strong government support due to its potential for job creation and to drive exports. Indeed, Prime Minister Theresa May praised the sector in a major speech this week.

Additionally, the recent Clean Growth Strategy promised £557m for renewables in the next round of Contracts for Difference auctions, which could potentially support 10GW of offshore wind capacity. We expect the next CfD tender in early 2019.

However, as strike prices decline, this squeezes the profits for investors. It will force investors to think harder about long-term predictions of open market prices when deciding how to invest, and find ways to mitigate risks. This is not straightforward as they are affected by many factors, such as changes in government and regulation.

The future of onshore looks more challenging, particularly in England, where the UK government has proved unwilling to support onshore developers. We see indications that politicians may be thawing on the idea of supporting new onshore wind schemes – not least because of the big price falls they have seen in offshore wind – but there is a major hurdle to supporting more wind farms: the planning system.

Since 2016, planning decisions about wind farms have been in the hands of local councils, not national government. This means that, even if developing onshore wind farms is in the wider national interest, they may struggle to get past naysayers at a local level. How the industry might overcome this remains to be seen, but Piers Guy of Vattenfall told us recently that it could depend on how convincingly the industry argues that it represents value for money.

If you’d like to read our market analysis in more depth, our Q1 Finance Quarterly is available to download here. Special reports are included in the price of membership: if you’re not yet a member, you can find out what we’re all about by signing up to a 30-day trial of our intelligence briefings.