U.K. to Create Clean Energy Bank, Boost Port Funding (Update2)

24/03/2010 at 2:35 pm Leave a comment

March 24 (Bloomberg) — The U.K. plans to create a 2 billion-pound ($3 billion) “green investment bank” to promote low-carbon energy as the nation seeks to cut emissions.

“We need to renew and modernize our energy supplies,” Chancellor of the Exchequer Alistair Darling said in his annual budget in Parliament in London today. “China is building a new power station every week to meet its growing energy needs.”

Asset sales and private investments will be used to fund the bank, Darling said. The proposal comes three months after opposition Conservative Party leader David Cameron suggested a green bank to consolidate government funding for clean energy. Prime Minister Gordon Brown must call an election by June.

Britain, chasing a target to get 15 percent of its energy from renewable sources by 2020, is planning $120 billion of offshore wind projects as well as gas and nuclear plants to replace aging generators. As much as 30 percent of the country’s power capacity is set to be shut down over the next decade.

Darling said the government will sell assets including the Channel Tunnel rail link to raise 1 billion pounds for the fund, which would be matched by private investments. The Chancellor also pledged about 60 million pounds to develop ports in support of offshore wind turbine makers.

While the green bank will help kick-start important projects, it “doesn’t fit with the urgency of the task at hand,” Ben Caldecott, head of U.K. energy policy at Climate Change Capital in London said in an e-mailed statement.

‘Difficult Market’

“As the cash for it is dependent on selling off strategic assets in difficult market conditions, it will take many months or even years before the fund is able to make a meaningful difference,” Caldecott said.

The structure of the bank will be developed by the government in consultation with investors and could be functioning by the second half of 2011, according to the Treasury. The money will help finance companies aiming to provide clean energy and reduce pollution, Darling said.

The U.K. has two to three years of “very comfortable” electricity supplies before aging capacity is phased out, Ofgem Chief Executive Officer Alistair Buchanan said in February. The country will need to spend as much as 200 billion pounds to replace infrastructure and curb emissions within the next 10 years, according to the regulator.

Last week, the Conservatives said they would adopt measures including a carbon floor price and feed-in tariffs if they win the election. The party also suggested speeding up the roll-out of smart meters and providing consumers with as much as 6,500 pounds of energy efficiency improvements.

The global financial crisis, tougher carbon targets and increasing gas dependency have weighed on industry funding, jeopardizing projects to bring production online.

Separately, the Department of Energy and Climate Change said it will not consider creating a single energy buyer and that more certainty in the carbon price wouldn’t be enough to alleviate concerns about security of supply. The department also opened a review on biomass subsidies.

“It was always clear to us that a return to the ‘command and control’ approach of a single buyer was not the right way forward,” Paul Golby, chief executive and chairman of E.ON UK, said in an e-mailed statement. “From our point of view, a low carbon obligation offers an opportunity to retain a competitive market framework, while also recognising the need to encourage low carbon generation over cheaper, but more carbon intensive, power.”

–With assistance from Catherine Airlie in London. Editors: Jonas Bergman, Mike Anderson.

To contact the reporter on this story: Kari Lundgren in London at klundgren2@bloomberg.net

To contact the editor responsible for this story: Will Kennedy at wkennedy3@bloomberg.net.

Source: http://www.businessweek.com/news/2010-03-24/u-k-to-create-clean-energy-fund-boost-port-funding-for-wind.html

Entry filed under: Green Finance, Renewable Energy.

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