United Kingdom
Is the Green Bank the answer to the renewable funding gap? - Michael Ware
Reading about the Government’s proposed Green Bank bought back anxious memories of my failed history A level; the answer I had carefully prepared in the preceding weeks bore little resemblance to the question in front of me. And I think the Government is making the same mistake. The arguments for the Green Bank seems to work as follows; the UK needs to spend upwards of £200 billion over the next ten years to meet our statutory target of producing 15% of renewable power by 2020, the banks are not investing at the required rate and lots of promising technologies and projects are stalled. But is this true and is a Government bank the answer? There is no doubt that the level of required investment in huge. Today the Times was quoting £3 trillion of required European spending. And yes the banks are not as willing to invest in the UK as they used to. This is understandable. The surviving bankers in London have 1,000 yard stares, traumatised by the events of 2008. They are not about to return to their personal Vietnam of highly leveraged lending any time soon. But the global picture is better. £145 billion was invested in renewables last year and we expect more in 2010. So maybe the reason some UK renewable energy projects are struggling to get funding is not because there is a shortage of capital, maybe it’s because they are just not very good projects. Evolution and the X factor both tell us three things, unbridled competition for scarce resources is cruel, makes for easy entertainment on a Saturday night and the good guys always win eventually. An investment banker I know reads 1,000 business cases for renewable projects a year and invests in 4 viable ones. My worry for the Green Bank is that it will act like a blind fairy godmother sprinkling its £1 billion of tax payers money like gentle spring rain. Everybody gets a little bit wet irrespective of merit but not enough to make a difference. Unlike Simon Cowell, the UK Government does not have a track record of picking winners. So what should the Government do instead? Firstly there is a funding gap between the promising technologies emanating from our universities and what can be funded. Unlike Che Guevara posters and membership of CND, some ideas from your University days are worth sticking with but the funding market for projects at this stage is thin. However large corporations they are better incubators of embryonic ideas to commercialisation than Whitehall. The Government can do a lot to encourage this midwifery through tax breaks and capital allowances and this is a better use of £1 billion. Secondly the planning system does not help. Up to 17.5 Giga watts of projects of renewable projects have been announced but are stalled pending planning objections. Put it another way, that’s 26 carbon dioxide producing coal fired power stations that exist because somebody somewhere does not want the view from their window impaired by wind turbines on the horizon. Finally the best role for the state is probably manipulating the policy levers of carrots for investment and sticks for carbon dioxide emitters. To be fair, the Government have made some headway here but the longevity of the supply of the carrots remains frustratingly vague. The investment community are like deer, they are easily startled by rustles in the bushes and the announcement of a 2012 review of Feed in Tariffs has made everybody skittish So we need to be wary of throwing money at voter friendly solutions to symptoms when the underlying causes are more complex than they appear. There would undoubtedly be a lot more investment in UK renewables if we addressed issues in the planning, taxation and subsidy systems although I know this does not play as well on the Today program. £1 billion will not go very far towards meeting the 15% renewable power target (it's about 1/3 of the cost of a single nuclear power station) but it is an awful lot of tax payers money to waste on the renewable equivalents of Wagner.
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