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.”