Securing long-term policy certainty

236. The UK government has set ambitious targets for renewable electricity. In their responses to the Review, businesses confirmed their commitment to invest further. However, many businesses made it clear that government will still need to set out more concrete steps on how ambitions are to be met. The Review heard that:

"There is no shortage of investors wanting to enter the market, but a lack of policy stability and suitably de-risked business models is stopping such finance entering the market." - Association for Renewable Energy and Clean Technology196

237. While there are interim targets and a roadmap for offshore wind, the Review found that it is less clear how the Government plans to deliver on ambitions for other technologies, including solar and onshore wind, in a way that will also support UK growth and jobs. Many respondents to the Review highlighted that collaboration between government and industry in the Offshore Wind Acceleration and Floating Wind Taskforces has "been very effective in establishing opportunities for supply chain development, the necessary enabling policy measures to unlock investment and the coordination of initiatives".197 They suggested establishing similar bodies for technologies that "would benefit from a more strategic discussion about how potential industrial growth could be maximised"198 such as the onshore wind industry.

238. Following the example of the offshore wind industry, the Review therefore recommends that government sets up joint task forces with the respective industries on onshore wind and solar and develops a roadmap for their deployment to support supply chain development.

239. At the same time, government should continue to work with industry to explore deployment opportunities in other renewable sources, including ocean energy, hydro, geothermal to support their development and deployment. Some of these technologies may be at a slightly earlier stage of development or provide opportunities in terms of balancing the grid (e.g. hydro, geothermal, biomass with CCS).

240. Stakeholders responding to the Review were also clear that a stop-start policy needs to be avoided at all costs. The Association for Renewable Energy and Clean Technology (REA) highlighted for example that "sudden policy changes, or reducing support for most affordable renewable technologies, including solar and onshore wind, reduces investor and developer confidence, increasing the cost of capital and overall cost of decarbonisation."201Businesses understood that reforms to policy and support mechanisms will become necessary over time. However, they highlighted the need for any reform to be well-thought through before being announced and, once announced, the need for swift implementation to keep uncertainty to a minimum. Stakeholders also pointed out that "the current political uncertainty and change of government has seen crucial legislation delayed"202 and urged for "creating certainty by passing the draft Energy Bill (HL Bill 39) and moving ahead with wider planned reforms".203

241. Industry also asked for long-term certainty on the support available. In particular, they raised the need for an early indication from government whether further support will be available when support schemes come to an end, such as the Renewables Obligation for landfill gas in 2027. There is a risk that, without any clear signals from government, businesses will put all investment decisions on hold for the time being. Similarly, the Review heard that "to increase investor confidence in net zero infrastructure projects, a clear forward view of the regulatory and policy landscape is vital."204

242. To bring a higher number of projects forward at a faster pace, stakeholders also raised potential reforms to the existing CfD mechanism. Many stakeholders stressed the need for a "well-communicated timeframe for allocation rounds so as to drive investor confidence and grow the UK supply chain".205 Some respondents suggested that "having six monthly CfD auctions, with clear rolling timetable and sufficient budget could see a significant pipeline of projects developed" and "ensure a route to market for all low carbon technologies". 206 Similarly, respondents called for "a clear schedule of CfD auctions for the next 5 years" to "provide the certainty developers and the supply chain need to collaborate and partner well-ahead of annual auction cycle".207 Others criticised that:

"The existing CfD model focusses solely on lowest cost electricity. This in turn drives developer procurement activities to seek lowest cost supply markets (e.g. from China/wider global markets) to enable projects to remain economically viable at such low electricity pricing. [...] The current CfD model thus misses the opportunity of helping foster the UK supply chain, with all the associated benefits this would bring such as jobs and the potential for export once that UK capacity has developed." - BP208

243. Stakeholders argued for the CfD mechanism to consider wider economic, supply chain and environmental impacts when contracting projects to ensure investments in the UK, as done in other countries. Some also pointed out that current Supply Chain Plans as a measure would be "limited in its ability to support collaborative investment as every developer's pipeline is subject to the risk of failing to secure a CfD contract in any given allocation round"209 and that the CfD mechanism should be "moving away from a single developer focus towards rewarding collaboration".210