The Rise of Renewable Energy in the UK

What makes this even more remarkable is that this is not the first renewable energy record in recent times. In May, solar energy output briefly eclipsed nuclear power. In fact, it is becoming increasingly common for so-called dirty fuel to be absent from the National Grid for several hours at a time.

Increasing Output

Renewable energy accounted for 26% of the total energy generated in the UK in the first quarter of 2017. This figure is up by 5% on the previous year. On-shore wind generation also broke records in the first quarter, generating 8.3% of energy for the National Grid. A government report found that on-shore wind generation increased by 1.3% in the first quarter, which was the highest increase across all renewables.

The Future is Bright

The future is looking bright for renewable energy, which is just as well as the government has tough climate goals to reach by 2030. Right now, renewable energy accounts for 25% of energy production in the UK. Wind power generation is increasing, particularly during the winter when energy demands are higher. What is interesting is that wind speeds were lower a year ago, but because wind farm capacity is increasing, energy generation is higher.

Not Enough Being Done to Push Renewables

So far, the UK has had success in the switch to low-carbon energy generation, but there is still much to be done. Lord Deben, chair of the committee on climate change, recently criticised the government for not doing enough to push the issue forward.

“The global transition – driven by worldwide government and private sector action – presents opportunities for UK businesses. The wide range of benefits associated with addressing climate change – such as cleaner air and improved health – will be felt by households. Achieving these outcomes requires action from this new Parliament.”

He said it was “neither justifiable nor wise to delay further”.

Negative Effects on Business

The push towards renewables is needed, but sometimes the effects on businesses are unwelcome and disruptive. The growth of wind and solar farms is threatening the big power companies. Low energy prices in Germany, fuelled by cheaper green energy, have seen share prices at RWE and EON plunge. There is a fear that the same will happen in the UK, but analysts believe that lower prices won’t have the same impact.

Right now, low prices during renewable energy output surges are brief and infrequent, but the infrequent nature of output spikes is causing volatility in the energy market. Traders may know how to trade oil, but the energy futures market is becoming increasingly volatile. For businesses who buy their energy in advance, as is common in the manufacturing industry, it can cause issues.

But, irrespective of perceived problems, the future is renewables and UK companies are going to have to find a way to adapt to the changes ahead.

Published: 22 November 2017

Article by IG Markets
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