Green energy: Funding renewables in focus
THE lack of clarity over strategic policy on energy is affecting funding of renewable energy projects, according to experts.
DLA Piper partner Ian Wood told TheBusinessDesk.com: “The challenges facing the sector are making people careful as to where they invest their money and where developers decide to go with their projects in the pipeline.”
Anthony Skadorwa, a technology manager for renewables at Cheadle-based Simon Carves Engineering, agreed:“For large – scale projects we need real forms of funding. Banks don’t want to get in with the first-of-a-kind – they want low risk – so you have to look at venture capital funds or wealthy individuals or a large company that wants to diversify and fund that off its balance sheet.”
The tide may be turning though. KPMG’s Renewable Energy M&A Report for 2012 reveals that globally renewables as an asset class is becoming increasingly attractive to long-term investors, who continue to refine their understanding of risk profiles, and to apply this knowledge to appropriately price assets.
While this is generally positive – Europe is not ranked highly by international investors.
KPMG energy expert Andrew McIntosh says: “While there was an increase in value of renewable energy deals in 2011, the US, India and China are seen as top destinations for investment but Europe is falling behind.”
Finding ways of new finance, in a highly challenging funding environment is a key issue for the sector.
Chris Matthew from Manchester’s Co-operative Bank, an expert in funding renewable energy believes securing money from pension funds, should be explored.
He said: “We have done a lot with wind and solar in the sub £25m bracket. But with the banks now, and balance sheet constraints, they don’’t have the capital available.
“We should be looking at how we bring others like pensions companies to the table and how to aggregate smaller assets to a large portfolio.”
Another more controversial alternative is to fundamentally change the way energy policy is made by taking it away from the government, in the hope this will encourage investment.
Anthony Skadorwa said: “The Department of Energy and Climate Change is a government-led department. They should take the model of the Bank of England and decouple it, so they have more of a say in steering policy and the longer-term future, not a short-term political view.”
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