Whilst the Scots are celebrating the decision to locate the headquarters of the Green Investment Bank (GIB) in Edinburgh, the whole of the UK’s renewable energy industry should welcome the news that the GIB has taken a major stride towards becoming operational.
First mooted in 2010 by the then Labour Chancellor Alistair Darling and subsequently taken up by the coalition government, the Green Investment Bank was touted as a major financial policy mechanism in supporting the UK’s renewable energy infrastructure.
However, to this point, the GIB has, substantially, lain dormant as it was forced to weather the raft of coalition spending cuts. Now emerging from a two-year hiatus with an initial capitalization fund of £3 billion (potentially rising to £15bn in four years), the GIB will begin lending from April.
To stakeholders in the UK’s renewable energy industry, the GIB represents more than a pot of money, it’s a symbol of the government’s commitment to following through on its green promises.
I have lost count of the number of industry figures I’ve spoken to over recent months who, when asked about the future of the renewable energy market, talk about the potential of the GIB to catalyze significant progress.
Developers working in the offshore wind or wave and tidal sectors, in projects with high initial capital expenditure, need a climate of secure and accessible investment in order to move forward. The extent to which the GIB is prepared to embrace risk in supporting such projects will be the real test of its mettle. For the bank to fulfil its raison d’être it must differentiate itself from existing lenders and help projects that are struggling to secure funding from investment banks or clean-tech investment capitalists.
For the GIB to be unduly cautious would be a missed opportunity; it must reflect the ambition and innovation that exists in our industry. I am not saying that the bank should sign blank cheques with gay abandon to anyone with a wave tank and an idea. Nevertheless, for the GIB to play things too conservatively would be a betrayal of its founding principles
We are at a crucial moment in the development of the UK’s offshore wind industry and meaningful investment from the Green Investment Bank could help the sector to drive down the cost of energy towards the target of £100/MWh, a level seen by many as the benchmark for commercial viability.
Likewise, the wave and tidal sector, albeit at a more nascent stage in its development, needs appropriate investment if it is to make the most of the significant marine energy capacity around the UK’s coasts.
Concerns have already been voiced that the GIB will be reluctant to support early-stage marine technologies; we must hope this does not turn out to be the case. The UK is leading the world in marine energy, being home to a number of device developers, including Aquamarine and Marine Current Turbines, and leading test centres in Emec, Narec, and Wave Hub. The time for investment is now.
GIB funding will doubtless attract further private investment. For offshore wind, marine, and other low-carbon sectors, securing the interest of the private sector is a key step on the path to delivering technologies that are commercially viable and reinforce the credibility of renewable energy.
Over the coming months the renewable energy industry will be scrutinizing the bank’s initial activities keenly. We are entering a pivotal period of development for a number of sectors and stakeholders will be looking for evidence of a clear appetite to help the industry progress. Administered properly, the Green Investment Bank could make all the difference.