Page 20 - DIY Investor Magazine - Issue 23

Broadly speaking, governments are behind the development of the renewable energy industry as part of efforts to reduce reliance on fossil fuels and support a clear ‘green agenda’. The noise around climate change and the risk it poses to the planet has reached fever- pitch and pressure on the UK Government to take action is increasing by the day. However, much more needs to be done to maintain progress.
Public demand for action to tackle climate change is high, and while the UK Government has been vocal in its targets for reducing greenhouse gas emissions, actual progress has fallen way behind what is needed.
‘CLIMATE CHANGE AND THE RISK IT POSES TO THE PLANET HAS REACHED FEVER-PITCH AND PRESSURE ON THE UK GOVERNMENT TO TAKE ACTION IS INCREASING BY THE DAY’
One of Theresa May’s outgoing pledges was to make the UK the first major economy to legislate to bring greenhouse gas emissions down to net-zero by 2050, yet the Government’s own projections demonstrate that its policies and plans are insufficient to meet the fourth or fifth carbon budgets (covering 2023-2027 and 2028- 2032).
The independent Committee on Climate Change
(CCC) laid bare the lack of action in a Progress Report published in July which found just one of the 25 policy actions it recommended in 2018 had been delivered one year on. Ten did not show even partial progress.
The mismatch between Government rhetoric and action is clear, with the CCC saying there is ‘limited evidence’ that the current administration is taking the emissions issue ‘sufficiently seriously’.
In some areas, there has been progress. The transition to renewable energy means that work to reduce emissions from power generation is producing solid results. While it still falls short of what is needed to hit the Government’s net-zero commitment by 2050, it has meant that Britain went for two consecutive weeks in May without burning coal for power.
‘UK GOVERNMENT NEEDS TO STEP UP AND TAKE GREATER ACTION, AND QUICKLY, TO INCENTIVISE INNOVATION AND INVESTMENT INTO THE SECTOR IN ORDER TO BRING ABOUT ACTUAL CHANGES’
The success of offshore wind – which is set to deliver
at least a third of UK electricity requirements by 2030
– is evidence of what can be achieved when good policy is enacted. Yet, ten years since the passing of
the Climate Change Act, there is still no serious plan for decarbonising UK heating systems, or improving energy efficiency in residential properties. Much more support is needed if the country is to make any realistic progress towards its climate change goals.
Average temperatures could rise by 4° or more by
2100 if current trends continue, the CCC says. The UK government needs to step up and take greater action, and quickly, to incentivise innovation and investment into the sector in order to bring about actual changes. Tougher targets do not themselves reduce emissions, and while the aim of ‘carbon neutral’ is laudable, real action needs to be taken for it to become a reality in our lifetime.
Nonetheless, the transition away from conventional forms of power supply and towards cleaner forms of generation is a structural trend that will last long into the future. The transition does pose challenges in terms of harnessing the power generated by intermittent sources such as wind or solar and maintaining continuity of supply, but the rapid development of the battery storage sector could well prove to the best hope we have of keeping the lights on in the decades to come.
The scale of renewable and cleaner energy development across the globe should provide a bigger pool of assets and expand the universe of investment opportunity available. Risks do exist of course; such as the sector’s reliance on government support and counter-party risk present in long-term power purchase agreements – the mechanism through which generators sell their output.
DIY Investor Magazine | Oct 2019 20