The Green Investment Bank (GIB) has just passed two major hurdles on the route to its formation, which should be welcomed. But there needs to be strict investment criteria to ensure it fulfils its objectives of being a truly ‘green’ bank.
The Enterprise and Regulatory Reform Bill cleared the Commons last month and will now move
to the House of Lords for consideration before securing Royal Assent. The legislation establishes the GIB, which was also given European State Aid approval last month after months of consideration.
It will begin making commercial investments from 29 October with an initial fund of £3bn.
This move is an important step forward in realising the Government’s ambitions for technological innovation and carbon-reduction in the UK marketplace, and industry is fully supportive of these developments.
The specific remit of the GIB has been defined as providing ‘green impact’ and ‘additionality’ - a focus on delivering finance to areas where there is evidence of market failure, primarily offshore wind, non-domestic energy efficiency and waste infrastructure.
The GIB has a critical role to play in challenging times. The sluggishness of the economy has hindered the growth of the renewable energy market. This has been exacerbated by the Government’s recent wrangling over feed-in tariffs for solar energy and the delay to the Renewables Obligation (RO) bandings. This has only served to further reduce certainty and therefore confidence in the marketplace.
One crucial role of the GIB will be to inject confidence and unlock additional private funding to help the market secure the £200bn of investment required to put the UK on a path towards a secure, affordable and low-carbon energy future. The GIB will only be able to accomplish this if it is allowed to act as a bank and borrow on the capital markets.
An area of potential concern is the criteria on which investments are made. It is vital that, as part of its mandate, the GIB will allocate significant resources to funding projects which involve emerging, high-efficiency technologies, particularly in the waste sector.
The RO banding consultation initially proposed varying levels of support according to the efficiencies of energy-from-waste (EfW) technologies. When the banding outcome was announced in July, the Department for Energy and Climate Change removed the differentiation between advanced gasification technologies and the more primitive ones.
This lack of distinction risks the proliferation of rudimentary technologies because it removes the incentive to invest in innovation and improvement.
The remit of the GIB’s operations should be more tightly defined. By investing in the most innovative technologies, the GIB can ensure they achieve commercialisation and maximise its impact.
In the EfW market, the UK has the potential to become a world leader in advanced gasification technologies. It is important to identify ‘unintended consequences’ of domestic policy which might run contrary to that objective. With the right kind of investment, Britain has the potential to become a major exporter of, and world leader in, advanced gasification technology.
Rolf Stein, chief executive of Advanced Plasma Power