Onshore wind investors put off by punitive policies
More than half of the major sources of project finance for renewable energy developers say they will not lend to onshore wind projects in the UK until there is more clarity around subsidies.
Consultancy firm EY, on behalf of Scottish Renewables, surveyed 10 major lenders that together account for approximately 90% of project finance for onshore wind in the past two years.
Seven of the 10 provided information to EY, with four saying they would not lend to onshore projects until the Energy Bill received Royal Assent – expected sometime next year.
The Energy Bill will lay out this Government’s approach to CO2 emissions, wind power and oil and gas. As currently constructed, it would end the Renewables Obligation (RO) subsidy for onshore wind on 31 March 2016, but the bill still has several legislative phases to pass through and will likely be amended frequently.
The four companies cited the premature end to the RO as the primary reason for not lending.
EY assistant director Matthew Yard said: “The results of the survey indicate that raising project finance for UK onshore wind RO projects has become more complex, more expensive and increasingly difficult since the announcement of the early closure of the RO.
“Those banks that have indicated they are considering lending to UK onshore wind RO projects are now seeking better terms and some form of mitigation against a situation with no RO revenue.
“As we move closer to the RO accreditation end date, the ongoing uncertainty makes it harder for projects and sponsors to raise senior finance."
A spokesperson for the Department of Energy and Climate Change (DECC) said the department was taking urgent action to protect bill-payers and avoid an overspend on renewable subsidies.
The political uncertainty is also being felt in less traditional sources of finance, with crowdfunding platform TrillionFund announcing last week that it would no longer be able to offer renewable energy loans for the ‘foreseeable future’.
“Recent changes in government policy have rocked investor confidence and made the landscape for future renewable energy projects very uncertain,” read a statement from the company.
Scottish Renewables said the UK Government's decision to end the RO early would cost Scotland up to £3bn pounds of investment and prevent the production of enough green electricity to power 1.2 million Scottish homes.
WWF Scotland director Lang Banks commented: "This survey provides further evidence that the UK Government's energy plans are damaging investor confidence in the cheapest form of renewable technology.
"And, it's not just investment and jobs that are at risk by their reckless policies, but our ability to cut carbon emissions. Even the Government's own analysis shows that an early ending of support for onshore wind could drive up power sector emissions in the UK by up to 63 million tonnes.
"If the UK wants to be able to claim to be any kind of leader at the forthcoming UN climate talks, then it urgently needs to start setting out how it will meet its climate and renewables targets."