Green Investment Bank – a bang or a whimper?

The Green Investment Bank (GIB) – a bank for waste or a waste of a bank? In terms of lending power £3bn sounds a lot, but against the green economy’s claimed investment profile in the region of £300bn, the GIB has a considerable task if it is to achieve effective leverage.

With waste, renewable energy and energy efficiency as narrowed objectives for the GIB, that task is somewhat easier. But assuming the need for around 700 end-processing plants scaled at around 50-80,000 tonnes capacity averaging £20m a pop, that would suggest some £14bn is needed in waste alone, discounting feedstock preparation and logistics re-investment.

This latter assessment I originally mooted 10 years ago – it came out of some research work I undertook when I was employed at Biffa. Ten years on, and I am still sticking to it with anaerobic plants coming on line at a cost of £12m and advanced thermal gasification facilities carrying a £40m price tag.

Those in the nascent GIB need to realise that this is not just about a day at the technology races. In waste speak, ‘technology’ requires an comprehensive understanding of location-driven factors.

Here, demand for the output drives the energy profile. That in turn drives the conversion technology, which drives feedstock requirements. The type of feedstock drives how it is treated or prepared and finally, that underpins the logistics method. And investment is needed at all stages of the cycle.

GIB planners also need to understand that before any finance is committed to an infrastructure project, any feedstock, site, planning and exit product market issues need to be de-risked. The latter is reflected in the output as electricity, gas, heat, transport fuels, recyclate or soil substitutes. Sorting out just one or two of these factors is not enough.

Finally if conventional bankers are running the project, then be prepared to go the extra mile. Many in the queue for funding will already have complex structures of equity, debt and mezzanine. Not to mention being dependent on forward government support mechanisms which, as in solar, could have the plug pulled at any minute.

All in all, the GIB will be a recipe for interesting decisions – probably with the gestation of an elephant which will be process rather than outcome driven if the bureaucrats get free reign.

Peter Jones is an independent waste and economics advisor