Marine energy developers will have to wait until after 2015 before they can take advantage of finance from the Green Investment Bank, and solar power developers are currently confused about whether they will be able to use it at all.
The Department of Business, Innovation and Skills (BIS) has released a progress report on the principles under which the bank will be able to lend, citing a wide range of sectors including especially offshore wind, non-domestic energy efficiency and waste, but not mentioning solar PV.
The priorities are still being worked out, including whether domestic energy efficiency measures under the Green Deal will be eligible, since the Government wishes this to be primarily a private-sector led scheme.
But reading between the lines, it seems that the bank will be cautious, not proactive, in its lending, regarding itself not as a source of capital funding for projects whose profitability is some way into the future, but as venture capital for market-ready technologies.
BIS’s Vince Cable has been in disagreement with Chris Huhne at DECC over what the bank should finance, with Huhne arguing that horizon technologies such as marine and anaerobic digestion should be favoured.
It seems that Cable has largely won this tussle, especially since BIC will be the only shareholder of the bank - leaving DECC out of the picture in decisions over what will be financed.
Various groups immediately criticised this narrow remit, expressing, like regional renewable energy trade body Regen SW, that “for the bank to be truly effective it's important it doesn't take the simple option of investing in safe projects that would simply compete with bank finance."
Its chief executive Merlin Hyman added, "It must focus on leveraging the required private capital by financing commercially-viable projects at the earliest stages, where the highest risks are inherent."
Manufacturers’ organisation EEF demanded more detail on the type of projects that would be eligible for funding from the bank. Tony Sarginson, its North-east regional manager, said: “The big question of what will be its funding priorities is yet to be answered."
But BIS says the bank's operating principles will include making a significant environmental impact as well as financial returns; operational independence from Government; partnership with the private sector, and the minimisation of market distortions.
The bank will evolve as follows: from April next year, subject to state aid approval, the Government will be able to make direct financial investments is self to priority projects. After this, when the bank is a stand-alone institution, it will lend according to the criteria in the document published by BIS this week.
Following April 2015, it will be able to borrow money, assuming public sector net debt is falling as a percentage of GDP, and therefore radically increase its activity. But what if it is not?
Wind power, particularly offshore wind, nuclear, transmission networks, energy efficiency and waste are cited as being particularly urgent, although nuclear is not seen as particularly relevant to the remit of the bank, whereas the provision of rolling stock and marine energy are.
If the bank does lend to nuclear operators then a close watch has to be kept that there are no further liabilities for taxpayers.
In the area of waste management, novel technologies such as anaerobic digestion could be an opportunity for the bank.
BIS does to its credit point up the importance of energy efficiency, saying “many users are unaware of the potential savings or how to capture them and therefore invest less than the optimal amount in upgrades or building fabric, fittings, plant and machinery", so sees a role for the bank in promoting this.
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