Written evidence submitted by the Co-operative
Group
THE CO
-OPERATIVE GROUP
The Co-operative Group is owned by more than five
million consumers and is the UK's fifth largest food retailer
following the acquisition of the Somerfield supermarket chain
in March 2009 and operates one of the largest and most diversified
financial mutual businesses comprising The Co-operative Bank,
The Co-operative Insurance and Britannia. We are also a leading
provider of travel, pharmacy services and funerals. Our annual
turnover is £14 billion, and we employ more than 120,000
staff, operate over 5,000 retail trading outlets and handle more
than 20 million weekly transactions.
We have widely-recognised leading environmental and
energy initiatives. 99% of the electricity for our trading outlets
is sourced from good quality renewables, through wind and water-power.
We have provided £2 million in grants to install photovoltaic
systems in schools across the UK. The CIS Tower in Manchester
became Europe's largest vertical solar array when it was clad
in energy generating solar panels in 2005. In 2003 The Co-operative
Insurance (CIS) became the first institutional property investor
to transfer all contracts for its £2 billion investment
property portfolio to green electricity. In 2006 the Coldham
Wind Farm was launched as a joint venture between The Co-operative
Group and Scottish Power and supplies approximately 4% of The
Co-operative Group's energy requirements (equivalent to 9,000
homes). The windfarm is now set to expand with local community
backing. The Co-operative Enterprise Hub is a grant giving and
education initiative that allows for new co-operatives to be set
up to deliver on energy, environmental and community priorities.
One example is Energy4All, which via funding from The Co-operative
Group has set up further community energy projects, each owned
by members of a local co-operative.
Renewables are also central to The Co-operative Financial
Services' commercial strategy, from asset finance to institutional
investments renewables. The Co-operative Bank has committed more
than £400 million to be invested in renewable energy
and low carbon energy technologies including combined heat and
power (CHP) plants and district heating schemes. We have financed
several hydro schemes including one serving our food store in
New Mills; we are currently in the process of funding several
anaerobic digestion and biomass projects; and we are also entering
the microgeneration and energy efficiency sectors.
SUMMARY
- The Co-operative Group welcomes this opportunity
to respond to the Environment Audit Committee inquiry into the
Green Investment Bank.
- The Co-operative Group supports the creation
of a Green Investment Bank in the UK that focuses on targeted
support in existing markets and that does not compete with providers
in a way that would harm business.
- There is not enough green investment in the UK
but there are also many other delivery challenges including connections
and planning delays.
- A Green Investment Bank could help establish
a "pre-development equity fund" to help overcome the
early barriers for renewable schemes.
- A Green Investment Bank's focus should not be
too narrow and could deliver on large infrastructure projects
as well as community-scale energy.
- There is a role for a Green Investment Bank in
helping to deliver on other government priorities such as the
Green Deal but that this should not detract from the wide range
of projects that can be supported with little risk to public finances.
- A Green Investment Bank should not be set-up
for the express purpose of merging a variety of existing grant
and loan schemes. It would need a clear governance structure,
defined aims and the ability to make sensible investment decisions
in agreed priority areas with government in order to both be effective
and to deliver certainty for the markets.
INQUIRY RESPONSE
The significance of any barriers or "market
failures" requiring the establishment of a Green Investment
Bank, and any risks of not getting this done quickly
1. The Co-operative Group supports the creation
of a Green Investment Bank in the UK that focuses on targeted
support in existing markets and that does not compete with providers
in a way that would harm business
2. Clearly there is not enough lending to the
renewable sector in the UK and a Green Investment Bank will help
to create a more positive environment for banks to increase their
lending, where applicable, backed by government guarantees.
3. Many of the delays in terms of delivery are
not necessarily financial, with planning decisions often taking
many years for large schemes and the length of time and complexity
of connecting to the grid being other reasons why we do not see
the level of delivery in the UK that we perhaps could. As part
of the government's Localism agenda, there is a strong case for
streamlined planning, particularly for community-owned and led
renewable schemes.
4. The risk of not getting on top of these challenges
is simple - that the UK will miss its targets, will not tackle
energy security issues and allow competitor economies to grow
in green industries, further disadvantaging the UK despite some
of its natural advantages in terms of potential renewable energy
generation.
The objectives and 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
5. A Green Investment Bank should not seek to
provide direct lending to schemes in a way that competes with
existing lenders as this would have the consequence of creating
an uneven market.
6. A Green Investment Bank's primary role should
be to intervene where the market either cannot current operate
(such as with emerging renewable technologies) or in areas where
the financing risk is currently too high (such as with schemes
that are stuck at feasibility stage and cannot progress to a point
where a bank would provide debt financing).
7. Its role should be one of support to business
and lenders through "de-risking" funds that can act
as a guarantee to lower the risk to lenders. This will enable
more lending to flow into renewable schemes that at present without
creating a huge draw on public finances. One way to achieve this
would be a "pre development equity fund".
8. The Co-operative Group believes that there
is a strong case for a Green Investment Bank to stimulate delivery
in the small and community-scale renewable sector. At present
there are a high number of schemes, with community or small business
backing, that are in the pipeline, working hard on their feasibility
studies - be that testing wind speeds or in examining connection
costs. Small-scale schemes have high up-front costs that represent
a risk for lenders meaning that a complex range of early funding
has to be found even before banks will examine the scheme. A
Green Investment Bank should be playing the role of an institution
that can lend to viable schemes and help to cover the risk with
established lenders that will enable schemes to come forward.
Given the UK's challenging renewable targets, it is imperative
that the Green Investment Bank looks to having an "enabling"
role that encourages communities to come forward with their own
energy solutions. A pre-development equity fund would help to
achieve this.
9. The Co-operative Group believes that a Green
Investment Bank should not focus on a very narrow set of areas
or technologies, such as purely on off-shore wind. It is right
that there are a mix of schemes supported through a Green Investment
Bank, including both large and community-scale projects.
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
10. The Co-operative Group believes that a Green
Investment Bank can deliver both quick wins in terms of unlocking
community renewable schemes, alongside encouraging more sustainable
capital markets to support the UK's future major energy investments.
11. One priority for a Green Investment Bank
should be the sub- £20 million renewables sector. Government
support for small-scale renewables through mechanisms such as
Feed-in tariffs remain very important for those schemes that are
being delivered. Communities that can take control of their own
energy solutions are likely to make further in-roads into other
vital areas such as energy efficiency and retro-fitting. Alongside
funding support, there is an important role for a Green Investment
Bank to facilitate advice and support for communities wishing
to deliver a decentralised energy scheme.
12. A Green Investment Bank should support priorities
both in energy generation, but also in energy efficiency, such
as de-risking schemes that deliver renewable heat. Such schemes
can have added benefits in terms of reducing fuel poverty. The
Co-operative Bank has worked in partnership with local authorities
to make better use of heat in social housing and believes that
this is a model that can be rolled out across the UK. Therefore
The Co-operative Group believes that local authorities, the public
sector and partner organisations should be able to access funding
through a Green Investment Bank.
13. A Green Investment Bank could help to deliver
the government's stated priorities for the Green Deal. Energy
efficiency is vitally important for the UK as through generation
alone the UK will struggle to meet its targets. However, as with
off-shore wind, a Green Investment Bank should not be pulled into
a narrow focus - by enabling a range of renewable schemes, there
will be many positive knock-on effects such as educating and enabling
communities, the public sector, schools and small business to
make further improvements as to how they use and save energy.
The funding and governance structures required
to create an effective and accountable body, including the role
of "green bonds"
14. How a Green Investment Bank is structured
from the outset will determine its role in the market and the
level of initial investor confidence. As such The Co-operative
Group believes that should the initial set-up of a Green Investment
Bank purely exist from a culmination of current funds and grants
from across government, this would do little to re-assure the
markets that it has a serious role to play in delivering green
investment.
15. A Green Investment Bank should look to have
a streamlined structure, covering market engagement, specific
government backed funds and an advice and support function. The
Co-operative Group believes that it would gain greater credibility
to be set-up apart from government but that government must play
a role in its governance in some way in order to ensure that its
remit does not end up too narrow. It should though be free to
make investment decisions that are focused both on the UK's renewable
targets and on interventions where the market has stalled such
as in the public sector or within communities.
12 October 2010
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