The UK has made significant strides in recent years in transitioning towards a low-carbon economy, with renewable energy playing a crucial role in this transformation. According to data from the Department for Business, Energy & Industrial Strategy, renewable energy sources generated a record 43.1% of the UK's electricity in the third quarter of 2021, up from 42.1% in the same period in 2020. In this blog, we will examine the state of the UK renewable energy market, including its growth, challenges, and opportunities and a summary of Plimsoll’s financial rating of the entire sector.
Growth in the UK renewable energy market
The UK has set ambitious targets for renewable energy production, including a target of generating 40GW of offshore wind power by 2030. The country has made considerable progress towards meeting this goal, with offshore wind farms now generating enough electricity to power over 8 million homes.
Solar power is also experiencing growth, with the UK's solar capacity doubling in the past five years. In 2023, solar power accounts for 4.8% of the UK's electricity generation, up from 3.2% in 2019. In addition, onshore wind power, biomass, and hydropower continue to play an important role in the UK's renewable energy mix.
Plimsoll’s latest assessment shows that post-COVID growth in the sector is up at 16%. Soaring demand for cleaner energy is clear but, in a cost-of-living crisis, can the consumer continue to pay for green levies and additional costs of greener energy?
Challenges facing the UK renewable energy market
While the UK's renewable energy market has seen impressive growth in recent years, there are still challenges to be overcome. One of the main challenges is grid capacity. The UK's existing grid infrastructure was not designed to accommodate the large-scale deployment of renewable energy sources. This means that there are constraints on the amount of renewable energy that can be connected to the grid at any one time, which can result in the curtailment of renewable energy production.
Another challenge facing the renewable energy market is financing. While renewable energy technologies have become more cost-competitive in recent years, financing remains a barrier to the deployment of new renewable energy projects. This is particularly true for smaller-scale projects, which often struggle to secure the necessary funding.
Plimsoll’s latest assessment of the entire sector shows profits across the renewable sector have soared to a near 10% benchmark. Is there a danger that companies are making too much profit at the expense of consumers, hence the pushback from certain quarters against Net-Zero?
Opportunities in the UK renewable energy market
Despite the challenges facing the UK's renewable energy market, there are also significant opportunities for growth. One of the main opportunities is the development of new offshore wind farms. The UK has some of the best wind resources in Europe, and the government has set a target of generating 40GW of offshore wind power by 2030. This will require the development of new offshore wind farms, which will provide significant opportunities for investment and job creation.
Another opportunity in the renewable energy market is the development of new energy storage technologies. Energy storage is critical for enabling high penetration of renewable energy sources, as it can help to balance supply and demand on the grid. There are currently a number of energy storage technologies being developed, including battery storage, pumped hydro, and thermal energy storage.
Plimsoll’s latest assessment of the sector shows that a quarter of the UK’s renewable energy companies are growing but making a loss. How long can companies continue to chase growth without making a margin?
Plimsoll’s assessment of the renewable energy sector
The UK's renewable energy market has made significant progress in recent years. With the right policies and investments, the UK can continue to lead the way in the transition towards a low-carbon economy. But what does Plimsoll say about the current state of play in the renewable sector and the niche markets within the wider sector?
The latest Plimsoll Analysis on the renewable sector shows a market in ‘rude health’. Here are some of the headline figures from the latest market analysis:
| Growth |
16.1% |
| Average profit margin |
9.2% |
| Average sales per employee |
£317,000 |
| Average profit return on total assets |
3.6% |
The top-level figures do mask a growing fragmentation across the different parts of the renewable energy market. The following is a breakdown of the main KPIs for various key industries in the green energy sector:
| Industry |
Growth |
Profit |
Sales Per Employee |
| Renewable Energy |
14.4% |
9% |
£317,000 |
| Biogas |
12.7% |
1% |
£554,000 |
| Biomass Fuel Suppliers |
7.6% |
3.3% |
£251,000 |
| Ground Source Heat Pumps |
25.7% |
3.4% |
£125,000 |
| Offshore Wind Farms |
16.2% |
41.9% |
£1,932,000 |
| Onshore Wind Farms |
14.3% |
29.4% |
£318,000 |
| Solar Farms |
11.7% |
8% |
£419,000 |
Plimsoll has produced a sector-wide study on the renewables sector and also individual niche markets within it. The latest assessment of the Offshore Wind industry shows it to be the best market in the sector. With 16% growth, margins of more than 40% and a sales per employee figure of nearly £2m, it is the jewel in the UK’s renewable crown.
A key up-and-coming part of the renewable sector appears to be ground-source heat pumps. Growing at almost 26% per annum, this new technology is in the early adoption stages of its lifecycle. If mass adoption becomes reality, can margins continue to grow from their current 3.4%?
Clearly, the UK is striving to lead the world’s drive towards a cleaner, more sustainable economic model. Its position as an island in the North Atlantic allows for abundant wind energy as seen by the outsized performance of wind. However, there are challenges across the whole sector and individual industries within it.
Plimsoll provides concise analysis on all parts of the renewable energy sector. For more information please visit www.plimsoll.co.uk and search for your main industries of interest today.