IBISWorld Updates Its Report on UK Renewable Energy Industry

The world’s energy crisis has necessitated a radical shift among policy makers and industry participants. Increased awareness surrounding the impacts of climate change has driven an aggressive decarbonising strategy, spearheaded by the Renewable Energy industry. The United Kingdom currently supplies 8.6% of its total electricity from renewable sources, representing a significant increase from 1.5% in 2006.

The UK Renewables Obligation plan set out clear objectives that aimed to generate 15% of the country’s energy from renewable sources by 2020. According to IBISWorld industry analyst Naren Sivasailam: “This in turn, prompted a wave of investment in renewable technologies, particularly of wind energy, and led to dramatic increases in installed capacity and overall industry revenue.”

The United Kingdom’s abundance of natural resources has boded well for industry operators, as the economic benefits of renewable generation were coming to fruition. This led to significant growth in employment opportunities as evidenced by the 14.9% per annum increase over the past five years.

The dismal economic climate did little to temper consumer uptake of renewable energy, further incentivised through the feed-in-tariffs plan that rewarded households for generating their own renewable electricity. In the five years through 2012-13, industry revenue is expected to increase 6.5% per annum to total £4.92 billion, increasing 2.8% in 2012-13.

The future of the industry is inextricably linked to the level of government support and the willingness of consumers to wear higher costs. Funding and investment are critical to the industry if the United Kingdom is to achieve its 2020 target and not continue to lag behind its EU counterparts. Issues such as grid connectivity, skilled labour shortages and other process-oriented shortcomings must be resolved in order to ensure a profitable and smooth transition to renewable energy.

Support from businesses and households are equally important in ensuring that the benefits that lie from a prosperous renewable sector are realised. While wind power will continue to lead the way, other sources such as hydropower, biomass and tidal energy also present strong opportunities for growth.

Sivasailam adds: “Prioritising access to renewable energy can advance social and economic progress in the long term, as it has the ability to strike the elusive balance between profitability and sustainability.” In the five years leading up to 2017-18, industry revenue is expected to continue to increase strongly.

The Renewable Energy industry has a medium level of market share concentration with significant segmental differences. The wind power segment, for example, is highly fragmented with a large number of companies with both offshore and onshore wind facilities.

The hydropower segment is similarly diverse, with a host of utility suppliers operating one or more dedicated hydro facilities in line with the RO set by the government. Most of these facilities are located in Scotland, which overwhelmingly accounts for the majority of the country’s renewable energy output.

In 2012-13, the top three players in the industry are expected to account for less than 40% of the market. Major companies include Scottish and Southern Energy, Iberdrola Renovables and E.ON UK.

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Offshore WIND staff, August 31, 2012; Image: DONG Energy