A new report produced by the REA (the Association for Renewable Energy and Clean Technology) and sponsored by Eaton and Foresight Group states that while the UK has set ambitious decarbonisation goals and its regulatory alignment to reach net zero is to be commended, current policy priorities appear more focused on short-term political imperatives, leading to increased investment uncertainty.

The report suggests that while the UK has some of the most ambitious targets for 2030, it faces some of the biggest challenges in reaching them. Energy transition governance and regulation, grid access delays, and unfavourable flexibility markets all contribute to investment uncertainty and hold back the deployment of renewable energy in the UK.

Investors will be attracted to the UK’s energy transition only if they can see patterns of clear governance and regulatory stability emerging, says the report. At present, the signals are not strong enough.

The report, the Energy Transition Readiness Index (ETRI) 2023, produced by the REA assesses and compares the electricity markets in 14 European countries. This edition finds that the UK has risen slightly in the overall rankings since last year’s report, sitting in front of countries such as Germany, Italy, and Switzerland. However, it is lagging behind European countries that have flexibility markets that better deliver fair, transparent, and simple access.

Flexibility is essential to stabilising a high-renewables grid. As coal and gas generation are phased out, national grids must balance the variability of some forms of renewable generation with their country's demand for energy. The best way that countries can achieve high levels of flexibility is by encouraging investment in what are known as demand-side response capabilities such as energy storage. Open markets for flexibility are another critical requirement, and although flexibility markets are developing in the UK, progress is by no means sufficiently extensive or fast enough.

Overall, respondents to the survey that underpins the report considered that progress towards the energy transition in the UK would accelerate faster if equivalent measures to the US Inflation Reduction Act had been introduced. The REA considers that the long-term financial impact of slowing the energy transition will be severe.

Key recommendations

ETRI 2023’s recommendations for all assessed countries are that they should create an open market for flexible low-carbon assets, allowing these to compete fairly with carbon-intensive assets, and lead on demand-side reform.

Key recommmendations:

  • Identify future low carbon flexibility needs;
  • Prioritise and accelerate flexibility market reforms;
  • Urgently address technology and process barriers.

Frank Gordon, Director of Policy at the REA (Association for Renewable Energy and Clean Technology) said:

“During last year’s publication of ETRI 2022, we welcomed the government’s warm rhetoric but called for significant action. This year we reiterate the urgent need for action, but do not have the luxury of such government warm words. Recent rolling back on some green policies in the UK has seen a decline in both public and political confidence regarding the energy transition as illustrated in the report.

“Significant action from the government to remove the barriers facing our industry is essential: proper long-term planning; prioritising and accelerating market reforms; and urgently addressing current investment barriers – all are desperately needed to help put the UK on the right path.

“The REA continues to urge all political parties to pull the levers to accelerate the UK’s energy transition readiness. With the right policy and regulatory environment, the government can ensure that we do not fall behind.”