Renewable energy investment: why the UK and US are diverging
Renewable energy investment policy in the UK and US
Over the past decade, the United States and the United Kingdom appeared to be converging toward a shared objective with respect to renewable energy: large scale deployment supported by market mechanisms rather than direct state ownership. Five years on, however, the two have diverged significantly in approach and political commitment. The US adopted an aggressively incentive driven strategy, while the UK relied on more muted, auction based support.
Renewed instability around the Strait of Hormuz has reframed renewables as a core component of national security, particularly in the UK as a net importer of energy. The UK’s structurally constrained energy position has driven a relatively consistent commitment to renewables, while the US, despite historically generous incentives, has shown increasing policy volatility, particularly in sectors such as offshore wind. This divergence is increasingly shaping investor confidence and long-term capital allocation decisions. This reflects a widening gap between energy import dependent and export dominant economies, and the implications for cost, resilience and long term system security across energy markets.
In short, perspectives on renewable energy differ because the UK treats renewables as a key part of its energy security strategy, while the US treats them as just one option in their ‘all of the above’ energy mix.
The mid 2010s: US activism versus UK restraint
From roughly 2015 onward, the US positioned itself as one of the most fiscally supportive jurisdictions for renewable investment. Federal Production Tax Credits (PTC) and Investment Tax Credits (ITC), supplemented by state level Renewable Portfolio Standards, created a very attractive incentives package for investors and developers. These mechanisms attracted significant foreign capital, particularly in onshore wind and utility scale solar. Even amid periodic lapses and extensions, the direction of travel was clear: renewables were a federally encouraged asset class.
By contrast, the UK after 2015 consciously stepped back from tax led incentives. The removal of renewable assets from the Enterprise Investment Scheme (EIS) was implemented in April 2016. The closure of the Renewables Obligation (ROC) to new capacity in 2017 and the absence of meaningful tax credits reflected a policy preference for competitive price discovery over fiscal stimulus. Contracts for Difference (CfDs) offered long term revenue certainty, but little in the way of balance sheet enhancement. To international investors accustomed to US style tax monetisation, the UK offered a stable, albeit conservative, proposition.
Stability as the UK’s strategic asset
Notwithstanding its relative fiscal restraint, the UK’s approach delivered something the US struggled to provide: policy continuity. The CfD framework, largely unchanged in structure since 2014, gave developers confidence that projects would not be retroactively impaired. Strike prices fell sharply across allocation rounds, particularly in offshore wind, reinforcing the UK’s reputation as a low political risk jurisdiction even if returns were comparatively thin. However, despite the initial concerns following the removal of ROCs and other government subsidies, developers were making merchant risk projects work.
Crucially, UK renewables policy has remained bipartisan. Changes in government have adjusted budgets, auction cadence, and technology ‘pots’, but not the underlying commitment to net zero or the contractual sanctity of awarded projects. Investors like certainty, and for infrastructure capital, pension funds, insurers, and sovereign wealth vehicles, this continuity often outweighed the absence of generous tax incentives. In practice, this has reinforced the UK’s position as a low-risk destination for long-term capital.
The Inflation Reduction Act: peak US enthusiasm
If the UK was cautious, the US briefly became exuberant. The Inflation Reduction Act (IRA) of 2022 marked the most expansive clean energy incentive package in US history, with an estimated $369bn in climate related spending and over $270bn in tax incentives alone.
Project economics changed and new participants, including tax-exempt entities via direct pay, entered the market. International capital responded accordingly with a marked uptick in European sponsors investing in the US. Offshore wind was positioned as the next frontier in US decarbonisation. This optimism, however, rested on a fragile assumption: that executive support would survive electoral cycles.
The U-turn: offshore wind and federal hostility
That assumption has proven misplaced. Since early 2025, legislation and executive actions have shown a shift in US federal policy away from solar and wind, with US offshore wind encountering an increasingly hostile federal policy environment. This marks a clear break from the policy direction established under the Inflation Reduction Act.
The most striking illustration of this reversal came in March 2026, when the US Department of the Interior reached a nearly $1bn settlement with TotalEnergies to terminate two offshore wind leases off New York and North Carolina. Rather than defending project approvals, the federal government reimbursed lease fees in exchange for the developer abandoning offshore wind investment entirely in the US.
The politicisation of US renewables policy: from incentivisation to partisanship
This underscores a deeper structural difference between the two jurisdictions. In the US, renewables policy has become explicitly partisan and is vulnerable to reversal through executive action, even where statutory support exists. As a result, fiscal incentives alone are no longer sufficient to guarantee investor confidence.
The IRA’s incentives remain on the books, but permitting, leasing, and administrative discretion now act as counterweights, effectively neutralising fiscal encouragement in politically sensitive sectors, such as offshore wind.
Despite the change in policy with the Trump administration, US renewable energy grew in 2025 on the back of many incentives continuing through 2027-28, and strong electricity demand growth in the US, which requires an ‘all of the above’ approach to power sources. In short, the administration may not like solar and wind, but when weighed against other forms of power like gas or nuclear, it’s still the fastest option in the near term.
By contrast, the UK’s comparatively ‘benign’ fiscal stance now looks less like neglect and more like insulation. While headline incentives are modest, the absence of politicised enforcement risk and the certainty investors value has preserved the longer-term attractiveness of the UK market. In contrast to the US, stability rather than scale of incentive is increasingly the defining factor. Developers may grumble about auction parameters, but they do not face the existential threat of cancellation after capital has been deployed.
Outlook for renewable energy investment in the UK and US: stability versus optionality
Energy security ultimately manifests in capital markets through investor appetite. While developers, utilities, and infrastructure funds calibrate risk differently, renewable energy investment in both the UK and the US is increasingly shaped by policy credibility, revenue durability, and geopolitical exposure rather than headline incentive generosity alone.
Investor appetite is the ultimate litmus test of energy policy credibility. The UK’s restrained but consistent renewables framework continues to attract patient capital because it aligns with an unavoidable energy security imperative. The US’s once generous incentive regime, by contrast, has been undermined by rising political volatility precisely because energy security pressures are less acute.
For industry experts and capital allocators, the lesson is increasingly clear: the value of renewable incentives is inseparable from political durability. On that measure, the UK’s modest consistency may now rival, and in some cases surpass, the appeal of America’s once generous, but now fractured, support landscape.
As instability around chokepoints such as the Strait of Hormuz persists, jurisdictions that treat renewables as structural security assets rather than discretionary policy choices are likely to retain investor confidence, regardless of the size of their incentive programmes.
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To discuss the implications of changing renewable energy policy, investment conditions or energy security trends for your business, and what this means for your investment decisions, please get in touch with Sheena McGuinness, David Carter (US) or your usual RSM contact.