By Renewable Energy Focus staff
At Climate Change Capital in London, Clegg said: “The Government will bring forward legislation to ensure both the operational independence and enduring nature of the bank. We are determined this organisation will be part of the institutional architecture of this country. Legislation will ensure a long shelf-life.”
The bank has already seen the guarantee of £3 billion for its initial capitalisation. The Government hopes to generate the funds through asset sales, but Clegg made I clear that the GIB is not dependent on such sales as it has been underwritten by the Treasury.
Investments will be made able from April 2012.
Clegg added: “Possible early priorities for the bank are offshore wind, waste, and non-domestic energy efficiency. We are also looking at the potential for using the bank to help deliver the first stages of the Green Deal.
“In the initial period, investment decisions will be made under interim governance arrangements, which Vince Cable will set out in more detail shortly.”
The GIB will have full operational independence and will be under a new board as soon as state aid clearance has been approved, Clegg said. Transactions to be made by the make could include equity, debt and risk mitigation products.
“The initial £3bn capital by 2014/15 should enable the bank to catalyse an additional £15bn of investment in green infrastructure.
“And finally, the bank will have borrowing power from April 2015, on the basis – as set out in the budget – that the Government target for debt to be falling as a percentage of GDP has been met,” Clegg explained.
Industry positive, but with some warnings
James Cameron, Vice Chairman of Climate Change Capital, said the announcements were “a major step forward,” though he warned: “This is only the end of the beginning. Momentum has to be maintained so that investors can receive the signals they need to deploy capital at scale into Britain.”
He added: “The fact that the Coalition will legislate to create an enduring and operationally independent UK Green Investment Bank with the power to borrow is decisive. It will guarantee that the GIB can play a key role in delivering Britain’s low-carbon transformation over the long term, while operational independence from Ministers and civil servants can ensure effectiveness and build confidence with private sector partners.
“The GIB will also focus on mission critical sectors, such as offshore wind and the Green Deal, that will be essential for creating the new green jobs and companies we need to tackle climate change and realise energy security. There was a risk that the GIB’s initial capitalisation could be spread too thinly at the beginning, but this is being addressed.”
Need teeth
John Cridland, CBI Director General welcomes the GIB announcement, but says its independence is vital.
“I want it delivering growth – large-scale, mainstream economic growth. I want it delivering the low-carbon infrastructure, leveraging the £450bn we need by 2025 that will bring jobs and opportunities to the UK,” Cridland said. “Investors want certainty. The GIB must have teeth if it’s going to deliver our new infrastructure.”
He warned that the GIB “certainly won’t work if it needs the Treasury’s permission to blow its nose. The bank needs to be able to get into the markets itself and do what it’s intended to do.
“And it won’t give investors certainty if it’s not enshrined in law, so I welcome the Deputy Prime Minster’s decision on that.”
Cridland also commented on the electricity market review: “The Electricity Market Review is a good attempt to create the right price and market signals to invest in low-carbon energy generation. But this will only work if we balance that against keeping the sectors reliant on that energy competitive. Without getting Electricity Market Reform right, the Green Investment Bank won’t deliver anything. We’ll rob Vince to pay Chris, pricing out the energy0intensive industries that are providing the answers.”
Getting industry off the mark
Martin Grant, Managing Director of Atkins energy business, said the aid to the green economy is important if it is to mature the way oil and gas has.
“The Green Investment Bank’s early focus on offshore wind is exactly the catalyst the sector needs. It’s true that some early schemes have struggled to stay within budget but that’s because the sector is maturing. The same was true of the UK’s oil and gas industry but once major financing came on board and projects started to flow through an expert workforce was created that quickly began to bring costs down as their experience grew. Once that starts happening you have a product that is internationally attractive and as we’ve seen from the offshore oil and gas sector, you then have a compelling export story.”