Green Investment Group – the same, but different

Scottish Renewables Chief Executive Claire Mack writes about the Green Investment Group's plans for the future after a stakeholder event in Edinburgh last week.

Until the summer, Green Investment Group was known as the UK Green Investment Bank.

A takeover by Macquarie in August saw the institution rebranded – and a stakeholder event in Edinburgh last week offered strong, positive signs for Scotland’s renewables sector.

Overall the message was simple: GIG is the same, but different.

Macquarie’s David Fass noted that the business’ move into green investment was a natural continuation of their role to date in infrastructure, energy and commodities markets.

David – the group’s EMEA Chief Executive – told how this is an

“important time in the world”

of renewables, with green energy technologies top of the list in both political and corporate conversations.

The Australian banking group is targeting the UK with £3 billion of investment, and says its only limiting factor is active competition attributed to the success of the Green Investment Bank during its time in public ownership.

GIG’s green portfolio is already impressive, covering energy efficiency, offshore and onshore wind as well as newer waste-to-energy projects.

Green investment, in short, is a familiar - and very productive - activity for GIG.

The event offered reassurance that GIG is adopting the Green Investment Bank’s underlying principles. In fact, known entities such as the Green Impact Reports and Green Investment Handbook will continue, alongside ongoing work on the Green Bond.

Successes for renewables in the UK to date were obvious: the appearance of multi-investor deals and a greater understanding of green and low-carbon among the investor community were highlighted, as well as the announcement of a third Contracts for Difference round.

Speakers from GIG pointed to a recent step-change which has seen investors and markets actively seeking information and accountability on the climate change impacts of investments.

This isn’t about regulatory sticks. It’s about organisations willingly injecting transparency, and then using that information to track their transition to low-carbon.

On the technology side, wind – both onshore and offshore - was a key topic at Wednesday’s event.

The issues around a route to market for onshore were acknowledged, as were the jaw-dropping costs reductions for offshore uncovered by the CfD auction results announced in September.

Onshore wind is thought to also be able to lay claim to significant cost reductions, but speakers told how this is also a long-term game in terms of business sustainability held up by certainty over future revenue streams and the policy that underpins them.

Driving the necessary low-cost capital into the technology, the event heard, will require more clarity over the future revenue model and plans for onshore within the CfD process.

There was no appetite during panel discussions for bespoke financial models and instruments for each project: many don’t require that, and the time is right for the mainstream banks to enter the fray.

If industry and manufacturing can see the benefits of decarbonising then investing with them to support this, delegates at the event heard, shouldn’t be a big leap for the banks.

Interestingly, GIG signalled that news of a new onshore investment will be coming shortly, while delegates also heard more work on Corporate PPAs is necessary to fully understand the model’s full potential.

The UK Government’s Green Finance Taskforce, reporting next spring, offers a great opportunity to think about what’s working - and about how we can do more of that better.

UK and Scottish Government support was discussed, with a sense that inconsistent policy has had a destabilising effect.

Indeed, speakers in a panel debate titled Green Finance in the UK and Scotland highlighted the occasionally “dysfunctional” relationship between Holyrood and Westminster on energy issues.

A 20-year forward look - in line with the objectives of the National Infrastructure Commission - in order to underpin strong growth for the sector and to support our climate change aspirations would be welcome.

And while the recent Clean Growth Strategy was viewed with positivity by many in the sector, finance’s role in its delivery set the backdrop for much of the discussion at the event.

A superb set of panel discussions followed.

To summarise their conclusions

• The 2030 targets are ambitious but achievable - and industry is gearing up to deliver
• There is a need for clarity, certainty and collaboration
• The future energy system will be more digital (smart), more decentralised and will see more on-site generation (a word of caution here from established players around paying for transmission and structures)
• Consumer behaviour will exert a strong influence, with greater awareness of use and costs on the rise

The event wrapped up with Keith Brown, Scottish Government Cabinet Secretary for Economy, Jobs and Fair Work, stating that his Government wants Scotland to remain a global centre for low-carbon and renewables.

I hope that, as we await the publication of the draft Scottish Energy Strategy, Scottish Renewables’ views in our response to the consultation on decision points and milestones have been heard at Holyrood.

There was good news for tidal – as it’s something Macquarie has “a particular soft spot for”.

Advice for the sector? Look to offshore wind, define what Government has got back for its support in the early days, and then articulate how tidal tech can achieve similar cost reductions and timelines.

A question remains over whether Government is committed to creating the same environment and conditions for all marine energy technologies, however.

Scottish Renewables’ discussions with members would also suggest there is some work to be done to understand the variables that form the offshore success story – how much have things like big international expertise and the scale of the UK market opportunity contributed, and is this replicable across other technologies?

Another area Scottish Renewables believes worthy of detailed consideration as we enter a new phase of renewable investment and deployment are potential new and innovative finance models that will build investor confidence in our earlier stage technologies.

As the Cabinet Secretary said on Wednesday – if we stand still, we will quickly be overtaken.