By Liam Stoker
Until
the UK’s energy policy and position in the EU energy market becomes clearer,
investors could be put off acquiring utility-scale energy generation assets,
particularly those in the UK. Credit: National Grid
The
European investment market for power generation assets is likely to be severely
hit by the continuing impacts of the UK’s Brexit vote, ‘Big Four’ consultancy
EY has warned.
However
clean energy assets backed by long-term power purchase agreements (PPAs) will
remain of particular interest due to their ability to provide stable, long-term
returns.
The
sentiments were raised in EY’s latest power transactions and trends report,
updated for Q2 2016.
Within
it, the consultancy has warned that until the UK’s energy policy and position
in the EU energy market becomes clearer, investors could be put off acquiring
utility-scale energy generation assets, particularly those in the UK.
Since
the British public voted to leave the European Union on 23 June there has been
substantial uncertainty over how the country will engage with continental
Europe and the wider European energy market.
The
UK is linked to Europe through various interconnectors, and energy is traded
with the continent through them. Various reports published prior to the vote
discussed the possibility of tariffs being added to any imported energy, a
practice which economics consultancy Oxera warned would add £140 million to household bills.
EY
also warned of the “mixed” regulatory support renewables had been afforded
across Europe. While France and Italy have backed solar and other clean
generators with fresh targets and support frameworks, Germany and the UK in
particular had withdrawn support.
The
UK has tumbled down EY’s Renewable Energy Country Attractiveness Index (RECAI)
in successive quarters and at the last update occupied 11th position.
But
while the outlook for renewable generators in general has been unfavourable, EY
did however state that investors had been buoyed by the number of assets backed
by long-term PPAs, which it said were able to provide stable, long-term
returns.
Appetite
for securing PPAs with the UK’s operational solar farms has intensified in
recent quarters with the wholesale energy price plummeting, driving interest
from asset holders into reducing their exposure to such fluctuations.
Asset
owners such as Foresight and Bluefield have pursued PPAs after wholesale energy
prices dented their net asset values in the last year.
