Corporate PPAs buoying investment in British renewables, EY finds

Image: RWE

EY has published its Renewable Energy Country Attractiveness Index (RECAI) every six months since 2003. The 63^rd edition is out today (18 June).

The US has once again taken the top spot overall. EY noted the US’s rapid build-out of solar; 4.6GW were added in the first quarter of 2024 alone. This is one of many renewable technology success stories supported by the Inflation Reduction Act’s provision of a sweeping, multi-billion-dollar package of subsidies and incentives. EY is confident that the US is now planning ahead to increase grid investment and build-out to bring more renewables online.

China has regained its position in second, overtaking Germany since the last edition of the Index. Domestic and international investment in China is increasingly diverting from fossil fuels and towards grids, renewables and transport electrification, EY notes.

Meanwhile, in Germany, solar and wind auction schemes are evolving to crowd in more investment, with public funding on offer falling but interest continuing to increase. 5.5GW of bids were received for the latest round of solar auctions, far surpassing the 1.6GW available. Later this year, 15GW of onshore wind will be put out to tender.

The UK fared poorly in the last RECAI, dropping from fourth to seventh place. EY noted that would-be investors were often turning to markets with robust, modern green industrial strategies, which the UK currently lacks. Concerns were also raised about the government’s approach to supporting developers through supply chain inflation.

The UK is yet to climb back into the top five and is this time outranked by France and Australia. EY has given the UK a slightly better score this time around due to growth in the battery energy storage pipeline, interest in the corporate power purchase agreement (PPA) market and the government providing clarity on the future design of the Contracts for Difference (CfD) auction schemes.

On batteries, EY notes a 67% increase in the project pipeline year-on-year. 95GW of projects are now in the pipeline – far exceeding the 35GW recommended by 2050 by the National Grid. Planning rules for large projects were relaxed in 2020, which has boosted investment.

Regarding the CfD, it was confirmed in March’s Spring Budget that the sixth allocation round will provide a record £1.025bn. Up to £800m will be allocated to offshore wind, with the remainder split between established onshore renewables and emerging technologies such as geothermal and floating offshore wind.

PPAs in focus

The Index includes a dedicated table ranking nations on the strength of their PPA markets. Markets are ranked in terms of maturity, policy support and volume of deals.

The US is regarded as the most mature market, closely followed by the UK and Spain.

But Germany takes the crown for the most attractive PPA market overall, and France also features in the top five. In France, EY notes, the number of deals made is increasing due to a new scheme providing public financing support. The scheme is open to manufacturers and firms in extractive industries seeking deals of 10 years or more, from new, large-scale renewables.

Last year was a record year for PPAs, with deals made collectively exceeding 46GW. This year may not be another record breaker should the low levels of deals observed in the first quarter continue, EY has noted. Deals reduced partly due to rising wind costs and constrained corporate budgets.

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