May 18th & 19th saw the renewables sector come together for the annual All-Energy conference and exhibition in Aberdeen. While developers, manufacturers, enterprise agencies and financiers debated and endorsed the industry's progress in Scotland and pondered on the development of the offshore wind supply chain, the Scottish European Green Energy Centre (SEGEC) felt it prudent to remind delegates that many of the current business models won't deliver the project investment needed in the future.

Bankable Projects Needed

Chris Bronsdon | Scottish European Energy Centre (SEGEC)


With 7 of the 12 UK projects recently put forward by DECC to the EIB for NER300 funding being Scottish, developers such as Aquamarine Power continuing to secure and develop sites around Scotland and inward investment for the development of Offshore Wind coming from firms such as Mitsubishi and Doosan Power Systems, one could easily think that Scotland is punching well above its weight on the delivery of renewable energy.
 
If we consider the wealth of wave, tidal and wind resource, technical ability and ambition, then indeed it is, however, given that the focus of EU priorities is on the delivery of projects at such scale, this could amount to very little if we do not ensure that the regulatory, legislative and financial frameworks are in place to support their delivery. Quite simply, we need to make it easier to get projects built!
 
May 18th & 19th saw the renewables sector come together for the annual All-Energy conference and exhibition in Aberdeen. While developers, manufacturers, enterprise agencies and financiers debated and endorsed the industry’s progress in Scotland and pondered on the development of the offshore wind supply chain, the Scottish European Green Energy Centre (SEGEC) felt it prudent to remind delegates that many of the current business models won’t deliver the project investment needed in the future. The scale and type of projects being developed now have not been seen before, and current models simply won’t see them succeed. Without the right conditions, frameworks and understanding of the ‘European Machine’, projects simply won’t be ‘bankable’ in the eyes of investors.
 
“The main issue for policy makers is maintaining investor confidence, while the problem for investors is credibility of policy” said Jesse Scott, an environmentalist from Brussels working with think-tank DemosEUROPA. “Policy makers need to define long term market opportunities to inspire investor confidence to build capacity. Take CCS as one example. If there was no policy, nobody would do it because it is just far too expensive. Yet big CCS demonstration projects are still too risky for investors, even with a policy signal, so the only way to help launch some of these crucial projects is with public co-investment.” The NER300 funding mechanism has been a key factor in building confidence to develop a European industry for CCS, with ambitions for 12 demonstration plants across the EU by 2015.
 
Looking at smaller, innovative developers, the issue is less around public funds (initially) and more focussed on the risk (equity) and capital required to get the idea off the ground. This is not helped when policy makers move the goalposts. “Uncertainty needs to be reduced by the UK Government and at the moment the Electricity Market Reform is causing a hiatus across the sector. Having been through the process of raising funding, regulatory and legislative risk needs to be reduced to help us get the capital to develop the projects” said Allan MacAskill, Business Development Director at SeaEnergy Renewables. However, “regulators have a role to provide an appropriate risk framework that inherently avoids undue cost to the consumer while supporting development” responded Duncan Botting, Executive Chairman of SEGEC, “in general terms, they are quite good at assessing risk, but the issue to consider is to explore where the costs associated with that risk are passed”.
 
Scotland has been good at responding to industry needs where it can, and Linda Rosborough, Director of Marine Scotland added “in the marine sector, this has been aided by the target for consenting being set to nine months” which assists in closing the circle on lack of regulatory certainty impacting on finance decisions.
 
However, the closer to commercialisation one gets, the more cash is needed, and for the small innovative firms, this is very hard to attain, leaving them no choice but to seek partnerships with the bigger players simply to access the money, both public and private. MacAskill added that “going for public money is not about getting a big wodge of cash. You need to spend money applying for it, administering it and on the expertise to learn your way around it, particularly in Europe.”
 
But how does the smaller player gain better access without having to ‘buddy up’ to the bigger players and sacrifice their IP and business in the process? “It has to come from your end” answered Jesse Scott “and through intermediaries such as SEGEC who can connect people and assist with engaging with the EU.”
 
SEGEC act as a focal point for such innovative companies developing low-carbon energy projects in Europe by understanding the funding landscape, identifying the potential projects and facilitating the collaborative partnerships to form projects suitable for EU funding bids, which when successful, such as the European Offshore Wind Deployment Centre, Moray Firth Offshore HVDC hub and NorthConnect Interconnector, become these ‘bankable projects’.
 
But it doesn’t stop there. From the European policy perspective Jesse Scott comments that “2020 is almost tomorrow as far as investors are concerned. What happens after that? What will the targets be? What incentive schemes will exist? What is needed it the right framework – a mixture of regulatory ‘stick’ and funding ‘carrot’. If projects are looking for EU funds in the next 10 years, then they need to seize the opportunity and influence their governments and EU decision-makers now, otherwise the funding pot in the new EU multiannual budget will be squeezed.”
 
Ultimately, SEGEC is working on this now. Partnerships are a key element in the delivery process, and working with DECC, the Scottish Government, European Commission, lobbyists and Technology Platforms, SEGEC is engaging with, and on behalf of SMEs, utilities and developers to shape the future agenda to ensure that not only do we deliver the 2020 targets, but harness our role in the future.


Comments (1)

With Gordon Brown's committment to off-shore wind farms, this article should rise up the priority list. A twist might be to put the hydrogen production plant on a redundant oil rig thereby removing the necessity of cables from the wind farm to shore and no worries about lack of wind. It doesn't solve the UK's energy crisis but neither will wind farms.

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