Reality check for renewables in Europe

Although financing costs are unlikely to fall in the near term, European governments and renewables manufacturers can create more favorable conditions for inward investment, by developing resilient, localized supply chains. Supportive and mature policies with clear deployment targets, and active offtake markets are critical to introduce greater predictability of returns for investors. Respondents to KPMG International’s recent paper Energy transition investment outlook: Energy sector insights, cite offtake agreements (including power purchase agreements) as one of the top strategies energy companies use when investing in energy transition assets.[2]

European governments should also consider how to increase their investment in grid infrastructure and energy storage, to cope with the intermittent nature of renewable energies like solar and wind.

Our paper Energy transition investment outlook: Energy sector insights, revealed that 58 percent of investors feel government energy transition policy creates unnecessary complications or risks, and 56 percent say policy is too slow to adapt to market needs. Regulatory or policy risks are also considered the biggest barrier to investments in the energy transition.[2]

Investors want to see clear, consistent policies on subsidies, carbon pricing and permitting. Through its 2023 Renewable Energy Directive, the European Union (EU) has made significant efforts to speed up and simplify renewables permitting processes, whilst continuing to protect the environment.[3] However, a recent report claims that less than half of the EU’s proposed reforms have been implemented across the bloc.[4]