75% of businesses blame red tape for curtailing renewables investment plans. Why?

German developer BayWa and Re-Source have reported that European businesses feel responsible for helping the continent to move towards a greener economy – but politicians are holding them back. Frances Salter reports.

European corporations are keen to take a lead in the renewable energy transition. However, they are being prevented from doing so because politicians are failing to change policies fast enough to meet corporate demand.

That is a key finding of a report published by BayWa r.e. today, in partnership with the Re-Source alliance of clean energy buyers, that analysed views of corporations in six European countries.

The report found that businesses are keen to invest in renewable energy, primarily because of financial benefits of long-term lower energy costs and financial certainty they can get from locking in energy costs for the long-term.

But nonetheless 75% feel that, even in countries where political policy is broadly in favour of renewables, bureaucracy is a barrier to further investments – meaning that companies are unable to use renewables to their full capacity.

As we’ve previously written about on this blog, falling levels of government subsidies in Europe mean that the transition to a greener economy is now being driven by the private investment rather than public money. But, as this new report shows, it would be wrong to assume that the wind industry no longer need supportive politicians.

Rather, the nature of necessary government support has changed – the industry may not need financial backing any longer, but policy support is still essential.

What has the report found?

1. Businesses believe that renewables make economic sense.

92% of respondents said that low energy costs were the main reason behind their decision to invest in renewables. It is encouraging to see a solid majority of businesses confirm that investing in renewables makes financial sense, and that they’re confident of the long-term security of renewable energy supply.

2. But politicians aren’t helping: companies felt that bureaucracy was hindering additional investment.

Frustration was particularly high in Spain and Poland, where 40% of those surveyed said the government was not providing a favourable framework for corporations who want to use renewables. The figure was 39% in Italy.

3. And economic barriers are still a concern too.

Even though companies understand the long-term benefits of using renewable energy, respondents cited long payback times (44% on average) and overly-high investment costs (38% on average) as barriers to further investment. This was especially true in the UK and Poland, where high investment costs were identified as a problem by 46% and 47% of respondents respectively.

What does this mean for companies in the wind industry?

There is clearly still a strong desire from corporates to invest in renewables – but the high up-front costs and long payback times are still barriers to future deals. However, we still see that there are opportunities here for companies in the wind sector.

For wind farm owners, this means that there should be options here that enable firms to buy renewable power but without the long payback times – in other words, power purchase agreements. If businesses are unwilling to own their own projects due to the length of time it takes to see a return on investment, then buying renewable power through a power purchase agreement could be a useful middle ground.

And therein lies another challenge. There are still barriers to companies being able to sign these PPAs in various countries, including France, Germany, Spain and Ireland. The European Union is going to try and fix this with changes to its Renewable Energy Directive, which were released in June including a commitment to encourage countries to remove these barriers. It is still very early days for that.

These changes were the result of industry lobbying, including by organisations such as WindEurope. Indeed, RE-Source has being making policy recommendations to the EU and national parliaments about how to unlock investment, and has published guidance for businesses and other stakeholders in how to do the same.

That’s good. However, in our view, we think businesses should be communicating this to their customers and the public too. The more the public understands about renewables, and how corporates are willing to support them, the more pressure governments will feel to co-operate. There is great support for renewable energy in the wider population, and it’s a power that this industry is yet to harness.