The UK government’s scaling back of feed-in tariffs for renewable energy makes energy projects more attractive and sustainable, according to the Church of England’s pension manager.
Changes to subsidies for renewable projects, including rooftop solar, anaerobic digestion plants and wind farms, have been criticised in some quarters, coming ahead of the UK climate change conference in Paris.
However, according to the Church Commissioners, responsible for managing the pension funds and endowments of the Church of England, the scaling back of subsidies may help in the long term.
Roy Kuo, head of alternative strategies, said renewables were “more attractive” in the wake of the changes than they were before the cuts were announced.
He told delegates at an infrastructure conference organised by the Financial Times that subsidies were needed to bring down the cost of energy generation, but that the “heavy” subsidy was always difficult for the government to sustain.
“Those projects always had that risk,” he said, “whereas now, because the subsidy level is much lower going forward, the cost-production level of renewable projects is much less.
“[The changes to subsidies are] actually a much more attractive and sustainable way of providing that power into the UK grid.”
His views were shared by Mike Weston, chief executive of the Pensions Infrastructure Platform (PiP), who told IPE that certainty was “absolutely essential” when investing in long-term, buy-and-hold projects.
“If you’re saying ‘Well, I can forecast that out five years, and after that it all gets woolly because we might have a new government in five years’ time that changes the policy’, then you inevitably have to put a risk premium on,” he said.
“And then, ultimately, the projects get more expensive to be done, and the economics get more unpredictable.”
The Church Commissioners indirectly own several wind farms, having acquired the land on which they sit as part of a farmland portfolio in 2014.
They are also working with energy company Lightsource to develop solar power opportunities for rural property owned by the Church, and exploring the possibilities for wind farms on other rural real estate assets within its portfolio.
The PiP, meanwhile, has recently launched a solar fund managed by Aviva.
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