Renewables funding gap lower than previously forecast
GLOBAL - The UK's renewable energy gap is not as big as previously forecast, according to research by Paradigm Change Capital Partners in cooperation with Norton Rose.
Several previous studies have suggested that as much as £200bn (€237bn) is needed from investors to meet the UK government's 2020 carbon reduction targets.
However, the 'Mountains or molehills study' estimates it would only require an additional 19GW of renewable energy to meet the 2020 targets in the most cost-efficient manner, entailing some £37bn in total investment, or £54bn including domestic energy efficiency.
The report also points out that considerable amounts of this required capital - approximately £14.5bn - has already been committed.
This has the twofold purpose of reducing the overall burden of subsidies on already stretched public resources, while allowing the UK government to remunerate more appropriately to attract the right kind of sponsors and capital.
The second key conclusion is that, barring any unforeseen changes, there is a strong likelihood of having a condensed need for capital between 2013 and 2015.
The overarching concern, therefore, is not related so much to the total volume of capital required, but to the timing and concentration of this requirement, the report says.
There have been exceptional examples of pension funds directly taking stakes in offshore wind farms and providing equity capital, the report continues.
But it adds that schemes generally team up with a strong operating partner and that the conditions under which they have provided this capital have been quite distinct, unique and risk averse.
It said: "There is much talk about these entities participating heavily in this asset class in the future. However, our extensive conversations with them indicate a high degree of comfort, education and risk assessment has to be achieved before such wholesale involvement.
"This type of investor has very defined investment criteria and requires plenty of due diligence to get involved in an emergent asset class. Moreover, they are not a homogenous group acting singularly, but vary investment decisions according to size, location, type of mandate, risk appetite and underlying beneficiaries."
Mercer's 'Climate Change Scenarios - Implications for Strategic Asset Allocation' report, which was launched in February, found that global investment opportunities in low-carbon technology could be as high as $5trn (€3.6trn) by 2030.