By David Thorpe
Solar and other renewable energy firms and investors have reacted with relief to Tuesday's decision by the UK Government to keep the options of obtaining both Feed-In Tariffs (FITs) and the Renewables Obligation (RO) support for investors in projects sized between 50 kW and 50 MW.
But the UK Energy Minister Greg Barker, who took the decision, could have done little else while he is on a mission to sell British solar expertise in East Africa.
The news signifies that not only can firms feel more confident about deciding to invest in renewable energy projects in this size band in the UK, but also that there is intensive support from government for providing public funding from the International Climate Fund to leverage private investment in projects in Africa.
The domestic policy about-turn applies to solar, anaerobic digestive, onshore wind and hydropower installations of the same medium-to-large size.
Before Tuesday, it was looking likely that funding for this type of project would cease from the Renewables Obligation from next April. This proposal was part of the RO Banding Review Decision in July.
This would have resulted in a large number of serious commercial developers being in competition for limited funds with householders wanting micro-scale domestic rooftop installations: not the same market at all.
The domestic market would have contracted considerably.
But Greg Barker is currently in East Africa on a renewable energy trade mission with 30 executives from 19 British companies.
He had been persuaded to see the light and make the U-turn following lobbying by the Solar Trade Association and the Renewable Energy Association, for which he has gracefully congratulated them.
Although it does go to show that government ministers do sometimes listen, the fact is that he could hardly be seen to be hobbling British solar firms at home while at the same time promoting them abroad.
Kenya's Energy Minister, Kiraitu Murungi, told Greg Barker this week that he wants to see British companies involved in exploiting solar, wind and geothermal power throughout the country, particularly with geothermal in the Rift Valley, as well as developing its electricity grid, to fill the deficit in its electricity supply. The country currently relies on a single dam to satisfy much of its demand.
The mission is continuing on to Tanzania and Ethiopia to pursue similar deals. Amongst those travelling with Barker are representatives of Arup, Aldwych International, an energy company already well-known in Africa, Parsons Brinckerhoff, a building and engineering consultant, and Cluff Geothermal.
To help sweeten the deals, the UK is expecting to tap into its £2.9bn International Climate Fund (ICF), which is being spent in the period from April 2011 to March 2015. Around £1.2bn has already been approved for projects and £1.5bn of the money is fast-start finance, which must be spent by the end of December.
Globally, there is a total of $30bn fast-start finance that has been pledged at United Nations climate talks, and is supposed to be allocated by the end of December.
Barker told a meeting in the House of Commons a couple of weeks ago that the UK government is committed to mobilising the total amount of the ICF.
But he added that delivery of it, and the full £100bn Green Climate Fund pledged up to 2020 by developed countries at Dakar last December, will come from “both the private and public sector".
He stressed that, for business, “smart strategic use of public funds can mobilise a much larger amount".
"The private sector has to play a really significant part" in taking public money and making the most of it, Barker said. "We need to do a lot more to mobilise markets to make sure it's capable of delivering finance at that scale on an annual basis."
This is the reason why also travelling with Greg Barker are representatives of Bunge’s Climate Change Capital, an investor in greenhouse-gas credits, Parhelion Underwriting, a carbon-credit insurer, the investment and management Gentoo Group, and Temporis Capital LLP, all of whom are on hand to advise African governments on simplifying and making the most of energy purchasing deals.
More investment capital has been raised in London in the last twelve months to fund international renewable projects than in any other financial centre, Barker said, adding: “I want London to continue to be the pre-eminent center for raising that finance”.
Britain is at the forefront of efforts to promote opportunities for its renewable energy companies in developing countries, but is also urging other governments to take steps to get their own businesses involved in the clean tech industries there, because it represents such a a massive market.
There are opportunities also for investors and consultants to provide their experience in brokering energy deals to get the best value for money. Currently, for example, Kenya's power purchasing agreements with small suppliers are proving expensive.
Barker says the UK is also very keen for the new Green Climate Fund to be designed in a way that mobilises private sector finance.
A host city has yet to be found for this fund. Namibia, Germany, Mexico, Poland and South Korea are in the running, and a decision is expected to be made at the next board meeting in South Korea, which begins in just two weeks.
David Thorpe is news editor of Energy and Environmental Management Magazine and the author of Solar Photovoltaics Business Briefing published this month by Dō Sustainability.
His book is part of a new series of short ebooks – called DōShorts – that distil sustainability best practice for busy professionals, and can be read in 90 minutes.
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