A Green Investment Bank to attract private funding to the low carbon sector was one of several ideas outlined in the Conservative's energy green paper to revamp the UK's energy sector on Friday (March 19).

David Cameron and shadow energy secretary Greg Clark launched plans for what they call the largest overhaul of UK energy policy since the early 1980s

The paper, entitled ‘Rebuilding Security ,' sets out 12 key actions that a Conservative government would take immediately along with measures needed to mobilise the investment required to enact the "largest overhaul" of UK energy policy in 20 years.

Promoting renewable energy featured highly, along with decentralised energy - which includes biomass, biogas, combined heat and power (CHP), micro-generation and waste heat capture - while the party said it would also replace the Renewables obligation with Feed-in Tariffs "wherever feasible."

The Bank would form one part of a triumvirate of financial measures to attract private investment into low carbon technologies and combine the many disparate sources of funding currently available. Green ISAs and Green Bonds would also be created to leverage private sector finance.

It is now widely thought that the Chancellor is set to incorporate a bank with responsibility for around £2 billion of new low carbon infrastructure spending into his Budget statement this week, especially after a positive reaction from industry and environmental groups.

Tom Foulkes, director general of the Institution of Civil Engineers (ICE), stated the importance of a secure and affordable funding mechanism to support some of the more capital-intensive technologies, which would help usher in a low-carbon economy.

"Clearly, transforming the energy sector will require massive investment in new and upgraded infrastructure," he said.

"A Green Investment Bank will go a long way towards funding the development of new technologies, but there remains a need for a secure method of funding for the long-term investment in energy infrastructure."

Andy Atkins, executive director of environmental campaign group Friends of the Earth, added his approval of the plans.

"A Green Investment Bank is desperately needed to fund the replacement of the UK's outdated fossil-fuel energy infrastructure with the clean energy technologies of the 21st century, and to create new green industries and jobs," he said.

And Graham Meeks, director of the Combined Heat and Power Association (CHPA), said that a Green Investment Bank could be "instrumental" in driving development of integrated district heating infrastructure.

Renewables Obligation

Another much commented-on policy was a plan to shift away from supporting low carbon projects via Renewables Obligation (RO) towards Feed-in Tariffs, which are due to be introduced from April.

The green paper stated that the Conservatives would replace the "epensive [and] bureaucratic" RO, with feed-in tariffs to provide a "more stable and straightforward" revenue stream for investors.

Any facilities already operating under the RO would be allowed to continue unaffected or transfer to a feed-in tariff, which would also be used for future investments. The Conservatives said this policy would reduce investor risk and lower the cost of capital by providing more stable and straightforward revenues.

However, this proposal was met with criticism from industry bodies within the renewable energy industry and business group the CBI.

The Renewable Energy Association (REA) said it was pleased renewables formed an important theme in the proposals, but warned that changing the RO could be problematic.

Gaynor Hartnell, chief executive of the REA, said; "Allowing the feed in tariff to be used as an alternative to the Renewables Obligation for very large scale projects...is a very radical suggestion.
"The need for a stable framework runs through the document, and achieving this flexibility without causing instability would be a challenge."

The CBI highlighted that changing the RO could have a negative effect on businesses.

Dr Neil Bentley, the CBI's director of business environment, said: "We are concerned about proposals to replace the Renewables Obligation with feed-in tariffs. This could end up increasing energy costs for businesses and consumers without increasing investment."