The UK government’s plan for a catalytic green investment institution, as it is currently envisaged, risks writing small to medium sized enterprises (hence, SMEs) out of significant participation in Britain’s future low-carbon markets. At a panel hosted by the Aldersgate Group last evening, manufacturers and representatives of science and technology innovation industries called out the policy advisors behind the UK’s Green Investment Bank (GIB).
“It’s such an appalling waste of an opportunity,” was how Hugh Parnell, Director of Cambridge Energy Limited characterised the UK government’s plans the GIB.
The bank, which is to act as a market maker in the market for renewable energy, was originally to be capitalized with £4billion, now will only be capitalized with £1 billion and not for three years. Parnell doesn’t expect “the early stage” green energy economy– SMEs with entrepreneurial ambitions– to see any of that money.In switching the energy market over to renewables, the GIB places emphasis on financing big business utilities like British Gas– and letting the finance trickle down into smaller enterprises contracted, after an energy finance recycling process, by large utilities like British Gas to install housing insulation.
While there is undisputed acknowledgment that in order to move the renewable energy industry forward in the UK, vigorous risk mitigation strategies are needed to mitigate large upfront costs and long-term return horizons in order to stimulate finance from institutional investors still looking to turn around investment in 2-3 years. As the GIB isn’t to receive its first capital injection until 2013 or possibly 2014, this means it will take the process an additional 5 to 6 years, according to Peter Young, Chairman of the green finance think-tank, the Aldersgate Group– that is, until 2022 at the earliest that small to medium sized enterprises will see the effects of that money.
Parnell criticized further, “It would be such an easy win. Unfortunately this government is so high-browed on cost cutting, that they only think of value for money and therefore they essentially exclude any innovation companies from anything to do with the public sector and the public sector is 50-60% of procurement in this country.”
The UK government’s rhetoric, he said, is all about the ‘Big Society’– a return to economic growth lead by social entrepreneurs– SME types. Wayne Sharp, Chairman of the Carbon Trade Xchange, agreed saying that he fears that the GIBs exclusionary design will lead to a brain drain of the UKs brightest innovators– to the BRICs or other European Countries.
Gaynor Hartnell, CEO of the UK’s Renewable Energy Association largely agreed, explaining that renewable energy programs like the renewable energy obligation certificates, now have uncertainty built in until they are re-evaluated at time after the GIB is meant to begin operation. The renewable obligation is meant to provide finance for renewable energy projects and has succeeded in tripling the amount of renewable energy available in the UK since its inception in 2002.
She said that SMEs could use the renewables obligation to finance projects, but the uncertainty “could completely undermine a project, exactly the sort of thing where this bank could help.”