The UK has committed to evolving its energy infrastructure and plans to have 27 per cent of its energy supply to come from renewable sources by 2030.
Renewables made up 18.1 per cent of electricity generation in the first nine months of 2014, according to data from the Department of Energy and Climate Change. This compares to 2003, when it was just around 3 per cent.
More changes are already in the works. In April 2015 solar energy will be under a new regime: the current Renewables Obligation Certificate structure will be replaced with a Contracts for Difference scheme.
The ROC structure was enacted in 2002 to encourage the generation of electricity from renewables. It places an obligation on licensed electricity suppliers in the UK to source an increasing proportion of electricity from renewable sources.
Under the new CFD regime the government will pay the difference between the variable wholesale electricity price and the fixed “strike” price of the technology for 15 years.
This changeover will happen for other renewables, including wind power in 2017.
There are six renewable investment trusts that focus on solar and wind energy: Bluefield Solar Income, Foresight Solar fund, Greencoat UK Wind, John Laing Environment Assets, Next Energy Solar, and Renewable Infrastructure Group.
Investors will be provided for more certainty under the new CFD regime, as the companies generating the power should receive more stable returns and will not be exposed to market caprice for the first 15 years of the project.
Indeed, price is the one of the largest risks for the renewable energy sector, according to Mr Scouller.
He added that while a small change in short term power prices is “unlikely to result in any material change,” a long-term change could have a substanital impact.
The oil price plummeted at the end of last year and the beginning of this year, but the price of gas, which is more important for renewables, has been rising.
While overall sentiment for the CFD scheme seems positive, a report from Oriel Securities noted: “There is a feeling that details on the new regime have been slow to be released by the Government and there remain unanswered questions.”
This change in government policy has been thought to be quite positive in the long term, but in the short term it could hinder renewable energy investing.
The Oriel Securities report said: “As with any change in policy, there is likely to be some hiatus in new developments as investors become familiar with the practicalities of the new method of working.”
Investor demand
However, despite investor apprehension investment trusts in the sector are likely to continue issuing shares and grow in the coming years.
