Treasury to boost investment in Energy Grid

The Treasury announced this week a new package of measures to boost economic growth. The package is targeted at major infrastructure projects in a variety of sectors including the energy industry. It is expected that investment will be particularly targeted at Britain’s energy grid.

The main pillar of the package is a scheme called ‘UK Guarantees‘ which has been designed to kickstart infrastructure projects which may have stalled due to the current difficulty of accessing credit. £40 billion worth of projects which would qualify for the funding have already been identified, the majority of which are in the aforementioned Energy, as well as Transport, infrastructure.

Chancellor of the Exchequer George Osborne unveiled the scheme, commenting:

“The credibility the Government has earned through tackling the deficit is already helping millions of British families and businesses through keeping down the cost of borrowing.

“Now ‘UK Guarantees’ will use that hard-won fiscal credibility to provide public guarantees of up to £50 billion of private investment in infrastructure and exports.

“Britain’s credibility has been hard-won and involved difficult decisions, so I want to make sure its benefits are passed on to the whole economy.”

George Osborne was accompanied by Danny Alexander, the chief secretary to the Treasury, who stated:

“The measures we’re announcing today will help work get started on many important infrastructure projects and help our major exporters, providing lasting benefits for thousands of people and a significant boost to the economy.

“”This is yet another example of the Coalition working together to put its hard-earned economic credibility to work to increase growth.”

There are five criteria which must be met to qualify for the ‘UK Guarantee’. Projects must be:

-“Nationally significant, as identified in the Government’s National Infrastructure Plan 2011. The Government will also consider other exceptional projects of national or economic significance on a case by case basis, such as university infrastructure.”

-“Ready to start construction within twelve months of a guarantee being given and having obtained (or about to obtain) necessary planning and other required consents.”

-“Financially credible, with equity finance committed and project sponsors willing to accept appropriate restructuring of the project to limit any risk to the taxpayer.”

-“Dependent on a guarantee to proceed and not otherwise financeable within a reasonable timeframe; and”

-“Good value to the taxpayer, assessed by HM Treasury to have acceptable credit quality, not present unacceptable fiscal or economic risks and to make a positive impact on economic growth.”

The ‘UK Guarantee’ is of potentially huge importance to the UK’s renewable industry. The somewhat archaic nature of Britain’s national energy grid has long been identified as a potential hindrance to the expansion of renewable energy. Large-scale investment of the type hinted at by the Treasury would lead to modernisation of the grid  and allow large and small scale renewable developments to go ahead up and down the country. Being able to connect to the National Grid would only increase the country’s energy security, make the country less dependant on the international gas markets and their spiralling costs, create jobs and economic growth, help to keep the lights on and keep energy bills down.

The news was greeted with general enthusiasm. John Cridland, director general of the CBI (Confederation of British Industry) released the following statement:

“This announcement marks a big step towards unlocking the £250 billion of investment needed to renew our national infrastructure, two-thirds of which has to come from the private sector.

“The government has produced a package of measures that will use the public balance sheet to underwrite private finance, building on the ideas put forward by business.

“Investment and exports will be the dual drivers of future growth in the UK and this scheme should help fire both engines.

“While the government’s proposals address infrastructure financing, we now need to focus on project models to ensure delivery of the world-class infrastructure this country needs.”

It is hoped that this initiative will help the British renewable energy industry to continue to fast paced growth  it has seen in the last few years. Whilst some questions remain about the ROC banding consultation the launch of the ‘UK Guarantee’ demonstrates, in the words of Gaynor Hartnell – chief executive of the Renewable Energy Association, that “the Treasury wants to bring about growth in energy infrastructure.”

Great Leap Forwards for UK Renewable Energy

The Department of Energy and Climate Change (DECC) announced figures this week which showed that the amount of energy being produced from renewable sources has increased significantly. The figures were produced as part of the Energy Trends and Quarterly Energy Prices analysis which can be found here. Indeed in 2011 11% of the UK’s electricity demand was met from renewable generators.

The figures released particularly emphasised the great strides being made by the Scottish renewables industry. For example in the first quarter of 2012 4,590 GWh (Giga-Watt hours) of electricity was produced by renewable generation. This was in comparison to the 3155 GWh generated in the first quarter of 2011. In total 13,735 GWh of renewable energy was produced in 2011. This is an increase of 44.3% on 2010 and a whopping 97.3% increase in 2006 levels. Approximately 35% of Scotland’s total electricity demand in 2011 was produced by renewable generation. This is in excess of the Scottish Government’s target for the year, which was 31%.

Furthermore the figures demonstrated that in the financial year 2011/12 £1.7 billion of new renewable energy projects were completed in Scotland; helping to create over 4,400 new jobs. Scotland also has a higher level of projected investment in the renewables sector in terms of both finance (£8 billion) and jobs (3313) than anywhere else in the UK.

The publication of these figures was met with near unanimous enthusiasm from both government and industry. DECC Energy Minister Charles Hendry stated:

“Today’s statistics show a clear increase on the first quarter of last year across all renewables – with rises in wind, hydro, solar and bioenergy generation.

“Alongside a 36% increase in renewables capacity in the last 12 months, this shows that the UK is powering forward on clean and secure energy and is clearly a very attractive place to invest.”

Scottish Energy Minister Fergus Ewing released the following statement:

“These figures show that renewable energy generation in Scotland is going from strength to strength.

“The increase of 45.5 per cent in renewable output in quarter one 2012 compared to quarter one 2011 is particularly encouraging when you consider that 2011 saw the highest output from renewable energy to date.

“We are seeing great progress towards our goal of generating the equivalent of 100 per cent of Scotland’s electricity needs from renewables by 2020.

“Scotland has astounding renewable energy potential, and the Scottish Government is committed to ensuring every community in Scotland benefits from the opportunities of renewable energy.

“Projects representing £750 million of investment were switched on in 2011, with an investment pipeline of £46 billion. Industry figures show 11,000 people are employed in renewables in Scotland already, a figure which is set to grow. And since the turn of the year, we have seen Gamesa invest in Leith creating around 800 new jobs, the Green Investment Bank being headquartered in Edinburgh and Samsung Heavy Industries  announcing  it will base its £100 million European offshore wind project in Methil, creating up to 500 jobs. Renewable energy is already delivering jobs, investment and opportunities for the people of Scotland.

“Scotland is a genuine world leader in green energy and our targets reflect the scale of our natural resources, the strength of our energy capabilities and the value we place on creating new, sustainable industries.”

Jenny Hogan, Director of Policy at Scottish Renewables observed:

“These latest figures show yet again that renewable energy is becoming an ever important part of our energy mix.

“Renewable electricity sources – mainly onshore wind but also hydro, biomass and other technologies – are delivering power to homes and businesses across Scotland. Each time you boil a kettle, more and more of that electricity will have been generated from a renewable source such as a wind farm.

“Not only does the renewables industry now employ more than 11,000 people in Scotland, it’s helping to reduce our carbon emissions, tackle climate change and insulate us from volatility in the gas market which has been responsible for the major hikes in energy bills over the last few years.”

Dr Gordon Edge, director of policy at RenewableUK observed that “the release of these figures provides a powerful indication that green growth  is beginning to take hold.

“Wind is working, and providing an increasing share of our electricity supply. While the wind speeds in the first quarter of this year have been slightly higher than average, the industry is working to increase the capacity of our wind fleet, to help make sure we make the best use of Britain’s top-class wind resource. At the same time, the investment we’re making in wind power is generating over half a billion pounds of economic activity in the UK from onshore wind alone.”

The publication of these figures not only provides a boost to the renewable energy industry and to government, it also serves to outline not just what renewable energy can achieve for the UK in the future but what it is achieving now.