Out-Law News 2 min. read
26 Jun 2012, 12:11 pm
Lord Smith of Kelvin, who was appointed chair of the new bank last month, told the Scotsman newspaper that its initial £3 billion capital would be invested in "commercially viable projects that will deliver a return".
"Wave and tidal technology and carbon capture and storage are quite far away from becoming commercially viable," he said, according to the paper. "That is real venture capital stuff. That would be a step too far for us."
The GIB's initial investment priorities will be waste processing and recycling, waste energy, non-domestic energy efficiency and offshore wind, he said. It will also provide much of the capital required to establish the Government's Green Deal energy efficiency loan scheme, allowing property owners and occupiers to fund the installation of energy efficiency measures such as double glazing or insulation at no up-front cost. Repayments will be met through subsequent energy bills.
The setting up of the GIB was announced in 2010 as a means of providing finance to private sector projects related to environmental preservation and improvement. The Government has committed to funding the GIB with £3bn over the period to 2015.
It is intended that the GIB begin operations this autumn, once it is granted state aid approval by the European Commission. It will be headquartered in Edinburgh with an additional office in London.
Energy law expert Peter Feehan of Pinsent Masons, the law firm behind Out-Law.com, said that the news was unsurprising.
"The Green Investment Bank wants to concentrate on schemes which are deliverable within the short to medium term with technology types which are proven and will provide income returns," he said. "The key is to understand the income streams - waste to energy technologies, anaerobic digestion and on- and offshore wind are all deliverable. GIB will provide first-mover finance, but only where there can be commercial return - tidal projects do not fall into this bracket."
The outcome of the Government's consultation process on the Renewables Obligation (RO) could potentially have more of an impact on funding for marine energy projects, he said. Changes to the way various renewables technologies are 'banded' under the RO from April 2013 could see the financial incentives available for energy generated through wave and tidal stream technologies double.
The RO is the main financial support mechanism currently used by the Government to encourage the development of large-scale renewable electricity generation projects. It places an obligation on suppliers to source an increasing proportion of the electricity they supply to customers from renewable sources. Suppliers can earn tradeable Renewables Obligation Certificates (ROCs) at different rates depending on the type, or 'band', of generation method.
"Tidal projects could get anything between two and five ROCs, which may make the bankability of these projects easier," Feehan said. "We are seeing ROCs become increasingly important in solar funding."
