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
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
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
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 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").
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
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
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