The Green Investment Bank - Environmental Audit Committee Contents

Written evidence submitted by Regen SW


Regen in an independent, not for profit, centre of expertise in sustainable energy. Our mission is to enable business, local authorities, communities and other organisations to deliver ground-breaking renewable energy and energy efficiency projects with thriving local supply chains. Our achievements have included:

Driving the development of a dynamic marine energy industry in the south west including developing the ground-breaking Wave Hub project off Cornwall's northern coast.

Establishing the South West Bioheat programme which has played a central role in making the south west one of the leading regions for woodfuel technologies and in increasing renewable heat generation capacity by 20% in 2009-10 alone.

Bringing together the partners and providing the technical understanding to enable a ground-breaking district heating and biomass combined heat and power scheme energy centre for a development of over 3,000 homes at the Cranbrook site near Exeter.

The Environmental Audit Committee has set out an enquiry to explore how to maximise the Green Invesment Bank's effectiveness. Based on our experience of financing renewable energy on the ground we consider the essential features of the GIB to be:

An operational structure that is active and integrated within all areas of the UK - not just London-based with a narrow view based on financial markets - so as to engage all parts of the UK, based on the technology, geographical and commercial strengths of areas.

That prioritises investment in both large infrastructure-scale and medium-scale, community level schemes to enable low carbon transition at the large infrastructure and generation level as well as across communities and local authorities at ground level.

That actively seeks to promote local economic development as part of projects and acts as a catalyst to take the general public along with the transition to a low carbon UK economy.

That works with organisations such as Regen that work to support delivery of low carbon projects on the ground and can provide direct engagement with businesses, local authorities, Local Enterprise Partnerships and communities to bring innovative projects together with GIB finance.

1.  The significance of any barriers or "market failures" requiring the establishment of a Green Investment Bank, and risks of not getting this done quickly

1.1  It is to be expected that large scale renewable schemes will provide a strong initial investment focus for policy makers and the GIB. However the analysis done by Regen of renewable energy resources in the south west, funded by DECC, demonstrates much of the resource is in medium and community scale plants that can provide decentralised energy solutions for communities in a much more efficient and appropriate manner. These schemes are more difficult to finance and developers face stronger barriers to delivering such schemes. The GIB should play an integral part in unlocking this medium scale, decentralised generation that is demonstrated so successfully in European countries.

1.2  The "green" market economy is driven by government policy through regulation and fiscal measures which are susceptible to changes in administration. The absence of policy frameworks that have long term stability creates a risk climate that investors find difficult to finance. An example illustrating this is the recent warning of a change to Feed in Tariffs.

1.3  Changes in public administration can also act as a barrier by reducing market confidence in the short to medium term. The removal of local public investment vehicles (such as the Regional Development Agencies) and the impending implementation of Local Economic Partnerships and Regional Growth Funds needs clear articulation quickly as to what powers are and are not inherent, and how new growth funds will work to set out the prioritisation of low carbon energy. This has had destabilising effect on local confidence regarding project development and investor finance which the GIB should seek to resolve.

1.4  There is a clear need to bridge market and investor confidence gaps in technologies and solutions that are far from market or are in pre-commercialisation to de-risk investment and accelerate technologies to market. A good example is the development of marine renewables in which Regen has played a very active part where a clear public strategy is required to develop the sector. The GIB should play a key role in this to reduce barriers to development and encourage more businesses to develop and bring products to the market.

2.  The objectives and the roles the Green Investment Bank should assume, the areas it should operate (and not operate) in, and how its lending and investment decisions should balance green benefits against financial risks

2.1  We do not have a comment on the full objectives and roles of the Bank. However, the experience of Regen SW's low carbon development programme is that there is a key role in tackling carbon emissions from heating for community scale low carbon CHP district heating schemes - as commonly used in Europe. For example we have supported the development of a biomass CHP energy centre to serve the Cranbrook development East of Exeter which has received planning permission. We believe the GIB should support such schemes which are difficult to finance until the market is operating effectively. De-risking investment in such schemes will increase private sector confidence in leading delivery.

3.  The Green Investment Bank's investment priorities, and whether and how the bank should support and foster areas where the uk has emerging green technology strengths

3.1  The GIB should identify clear investment priorities based on a coordinated UK strategy for low carbon economic transition. Whilst this will predominantly focus on the generation, distribution and consumption of energy (electricity and heat) it should also take full account of economic and social objectives to harness opportunities through support for business and entrepreneurial growth, high value activities such as innovative R&D and commercialisation as well as enabling local leadership of initiatives. Therefore the GIB investment priorities should focus on two key areas:

Large Scale

Large infrastructure to accommodate renewable energy generation to include: new electricity grid network; targeted grid reinforcement; increased storage capabilities particularly for off-shore generation; smart grid testing and establishment.

Generation schemes based on established or near-market technologies where the UK has a significant geographical, technical or competitive business edge, principally: on and off-shore wind; marine sector (wave & tidal); biomass and bioenergy to include renewable gas generation (to include injection and distribution via the national grid for clean gas using existing infrastructure - "gas to grid").

Medium Scale

Local and community scale initiatives that bring together local areas (Local Authorities, businesses, utilities and communities) to manage and implement schemes aligned with the technology, geographical and commercial strengths of their area (such as wind or biomass for example). These enable communities to take the lead in transforming their areas through ownership and reward. Regen SW has established Communities for Renewables, to support communities across the south west to take the lead in establishing local wind schemes via partnership with commercial sector specialists.

Decentralised generation (heat and electricity) to include storage and distribution capabilities for local to medium scale renewable generation that integrates district generation schemes with domestic microgeneration and smart grid capabilities.

Energy efficiency measures for large industrial and commercial sectors that are aligned with renewable generation schemes as part of a "low carbon" package.

3.2  In addition to providing capital finance investment it is crucial that funding is available to build the capacity and skills of people across the UK to support work on the ground and ensure schemes are brought forward that are robust and financeable. This should be a priority as it will drive an increase in skills and entrepreneurialism and leave a lasting legacy for stimulating future economic growth across communities.

3.3  The GIB should seek to establish from the start an operational governance structure that has engagement in areas across the UK. This will enable the GIB to develop understanding and commercial engagement of specific areas of the UK with green technology strengths, for example marine, biomass, solar and wind markets in the South West. Failure to do so will ensure the GIB operates without the operational insights into key markets and strengths across the UK which will reduce the quality of investment decisions and of projects brought forward.

3.4   The GIB should not prioritise investment in domestic energy efficiency or microgeneration as these issues are already supported under a package of policy and taxation measures of the UK government, most notably the Feed in Tariff regime.

4.  The funding and governance structures required to create an effective and accountable body, including the role of "green bonds"

4.1  Ensuring the GIB has effective governance, operational and funding structures that balances national objectives with intuitive knowledge of key areas of the UK is critical if the economic rewards of the low carbon transition are to be fully realised across the country.

4.2  The GIB should have an active operational presence and representation across all areas of the UK so as to build knowledge of geographical and technical strengths of areas and relationships with key players to increase innovative financing of schemes.

4.3  It is essential that there is representation of the third sector on the GIB Board and Executive Team to ensure that its investment priorities are balanced and achieved across economic, environmental and social spheres. It is essential that maximum economic opportunities are extended to local businesses and communities to enable local wealth creation and leadership through the low carbon transition.

4.4  The operational structure must be developed to ensure the GIB can engage out in the "real world", providing support to enable organisations to develop their capacity and skills to bring forward financeable schemes.

15 October 2010

previous page contents next page

House of Commons home page Parliament home page House of Lords home page search page enquiries index

© Parliamentary copyright 2011
Prepared 11 March 2011