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Leading Asset Funder Gives View on Renewable Industry PDF Print E-mail
Wednesday, 23 March 2016
With the resignation of Ian Duncan-Smith, city commentators casting concerns around the revised growth forecasts or missed debt targets and general outrage around disability benefits causing a giant embarrassing U-turn, the political fallout following Wednesday’s ‘smoke and mirrors’ budget continues.  
Let’s not forget, there are some winners too. We applaud a drop in corporation tax to 17% by 2020 and the changes rate relief for some 600,000 small businesses, helping the next generation of entrepreneurs transform their vision into a thriving reality. However, I bet you weren’t as pleased as Jamie Oliver? The chinking of low sugar fizzy-pop cans across suburbia would have sent dentists scurrying to redraw plans for that new extension to their French gite. Unless that is, soft drink manufacturers find a case for legal action, which is on the cards.

If you’d have tuned into last week’s Budget 20mins early, you would have caught the end of PMQ’s and heard the Labour Leader taking the Government to task on it’s clean air and energy policies along a failure to invest in greener energy. Fast forward an hour or so and the Chancellor was dishing out yet more tax breaks for our beleaguered North Sea Oil and Gas industries. Cheap oil is one thing but subsidised oil is yet another kick in the teeth for renewables at a time when we should be increasing our investment in this industry.

The UK, like every other major nation is locked into global climate change agreements to reduce greenhouse gases and the primary way of achieving this is by switching to cleaner energy sources – from the way we heat our homes or how we travel around.

A lot has changed since the Kyoto Protocol in 1997. Back then, India and China were exempt from global agreements to cut emissions by 5.2% by 2012. Today, China stands shoulder to shoulder with the US as the world’s biggest polluter.

In 2007 a Government White paper “Meeting the Energy Challenge” set out our domestic energy strategy with four key policy goals. The first of which I’d like to read to you. “To put the UK on a path to cut carbon dioxide emissions by some 60% by about 2050, with real progress by 2020”.

Study that statement carefully and you’ll see the huge scope for policy U-turns. By some. By about. Real progress. If you are a business involved in today’s renewable energy industry those three short sentences deliver about as much as impact as the wind turbine David Cameron popped onto the roof of his West London home back in 2007.

Today, the bottom line is that despite ever moving policy goal-posts, investment headwinds and clever lobbying from oil and coal giants, renewables are now contributing more of our energy needs than forecast and it continues fighting to change the way the world should behave in the future.

Recent data published by the Department of Energy and Climate Change (DECC) confirmed the UK's renewable energy industry generated a record level 22.3% of power in the first quarter 2015, an increase of 2.6 percentage points on the share delivered in the same quarter in 2014.

A rise in biomass generation was the main driver behind the increase, with output from the technology almost doubling, largely due to the conversion of second generation unit at Drax Power Station in Yorkshire from coal to dedicated biomass.

Solar power generation also grew 60% in 2014, whilst onshore wind remains the largest form of renewable power generation in the UK, with a 33 per cent of the sector. Meanwhile, offshore wind generated 22 per cent of the renewables mix.

Despite these successes by UK businesses, both large and small, over the last two years, the Conservative government has announced a raft of measures that have slowed industry growth and caused job losses. None have been felt more than in solar power, where in 2015 it was estimated 18,700 jobs had been lost.

CMF Capital’s Ian Hamilton is adamant things need to change. “The tax breaks for renewables were removed in 2015 summer budget, despite the Paris Agreement, and axing of subsidies for onshore wind which are effective this year, will create further problems for renewable businesses seeking investment.”

“It is hard to understand why, when such a relatively young industry is just starting to prove it’s worth and viability to we continue to bail out North Sea oil and embarrassingly flounder for overseas cash for an aging nuclear option at Hinckley Point.”

Whilst large renewable projects that are either being scaled back or shelved altogether. There is an ever more reliance on SME’s to help meet our green energy targets and over the last two quarters they have responded.

However, the 87% cut to the solar feed-in tariff and the closure of support for the flagship “green deal” scheme that incentivised homeowners to invest in insulation for their homes came into force on 1st January. While many SME’s reported a surge in demand in the last two quarters of 2015, The Renewable Obligation (RO) scheme, a separate solar subsidy for larger solar installations of up to five megawatts, is also set for early closure in April. The Solar industry is likely to go into reverse and others are under additional pressure.

“The rest of the world has recognised that renewable electricity inspires countless entrepreneurs to set up renewable businesses, but the Government’s stance seems out of step with other leading nations.” Continued CMF Capital’s Hamilton.

“As one of the leading UK independent asset funders, we have been championing investment in local and regional renewable projects over the last decade, realising both its potential to deliver the energy the UK needs combined with helping to safeguard our planet for future generations.”

“We have worked hard to secure a panel of funders who stand ready and able to invest behind projects across the country. Notably in biomass projects, which are of huge benefit to farming and agriculture industries. We also have expertise with anaerobic digestion and funding to provide the infrastructure relating to offshore wind farms. We also have the ability to re-finance assets. This is quite useful when equity has been invested via EIS schemes and they need to replace the funds which have a short time limit of up to 4 years. Our solutions are agile and tailored to clients’ needs or objectives.”

So as the clock ticks forward to 2020 and the emissions targets of the Paris Agreement come into view, the UK cannot keep changing its policy regarding investment into renewable industries. Coal and oil is not the answer and developed nations must lead the way with real commitment to change. Something a bit more robust than Cameron’s little roof top turbine – which incidentally, was installed the wrong way around.

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