Scotland’s Renewable Energy Investment Fund Opens for Business

A multi-million pound renewable energy investment fund (REIF), geared to stimulating greater levels of private finance into innovative green power and renewable district heating projects in Scotland, was opened for business by First Minister Alex Salmond today.

As senior figures from green energy, finance and government gathered in Edinburgh for the Scottish Low Carbon Investment conference, Mr Salmond also announced to delegates:

• Plans for an advisory group to support those seeking finance from the new UK Green Investment Bank; and
• A £4.3 million Scottish Enterprise investment in SSE Renewables’ Hunterston offshore wind turbine test facility

Initial priorities for the REIF are wave and tidal energy, community-owned renewables and renewable district heating, as well as other projects with a focus on innovative renewable energy technologies.

The Fund is designed to complement existing public and private sector finance schemes available in Scotland, providing bespoke investment deals typically involving loans, loan guarantees and equity finance alongside co-investment partners. The fund will be delivered by the Scottish Investment Bank on behalf of the Scottish Government and its enterprise agencies, with the first deals expected to be completed by the end of the financial year.

The First Minister said: “We are determined to ensure Scotland is among the world’s key destinations for investment in low carbon technologies, building on our long-established reputation in engineering, innovation and financial services. This fund will help leverage further significant private finance into key areas of the renewables sector where specific funding gaps have been identified.

“Alongside other initiatives such as the £18 million Marine Renewables Commercialisation fund, £70 million National Renewables Infrastructure fund and our Community & Renewable Energy (CARES) scheme, the REIF will support a wide range of projects to create jobs, investment and sustainable energy generation in communities across Scotland.”

Welcoming the new UK GIB being headquartered in Edinburgh, Mr Salmond added: “The planned advisory group will provide expert advice for people who have good ideas and projects to put to the Green Investment Bank, but who need a helping hand to make them ready for investment. The group will help those people to refine and pitch their proposals – by doing so, it should enable the Green Investment Bank to make decisions quickly, and to start investing in projects which will deliver real benefits.”

Commenting on the launch of the REI Fund, Scottish Enterprise chief executive Dr Lena Wilson said: “Building on the expertise of the Scottish Investment Bank, this new fund will not only help accelerate Scotland’s progress in key sub-sector areas of the renewables industry, but will be pivotal to unlocking greater investment from the private sector by sharing the risk through the co-investment, co-lending and other potential catalytic intervention model.

“This new fund is key to providing an economic, community benefit and environmental legacy based on our natural competitive advantage in renewable energy and comes at a critical time in the development of the sector. Scotland is continuing to push ahead in its transition to a low carbon economy, however, increasing access to finance to help expedite commercialisation of marine arrays and encourage more community owned and district heating projects is fundamental in our overall ambition to meet the target of 100 per cent electricity from renewables sources by 2020.”

Highlands & Islands Enterprise chief executive Alex Paterson added: “The deployment of the first commercial arrays is critical to the development of the wave and tidal industry.  REIF has been established to overcome the financial challenges facing the pioneering businesses at the forefront of this developing sector. In the Highlands and Islands we are already seeing real benefits from both community involvement in renewables and from the dramatic impacts of the emerging wave and tidal sector in Orkney. With the North of Scotland at the centre of the emerging wave and tidal cluster, and communities across rural Scotland active in renewables projects, the REIF fund will be instrumental in placing Scotland at the forefront of the low carbon economy.”

REIF has been designed to be complementary to other funds available, such as the Green Investment Bank, and is designed to support projects that are significantly advanced but have a demonstrable funding gap.

Scottish Renewables chief executive Niall Stuart said: “This £103 million fund will inject much-needed investment into the development of the next generation of renewable technologies, such as marine energy and renewable heat. This kind of support can be a vital catalyst in attracting even greater levels of private investment.

“Increasing use of renewable heat could make a significant reduction in carbon emissions and in tackling fuel poverty, given that around half of all energy used in Scotland is heat homes, businesses or industrial processes.  Scotland is already at the forefront of developing and testing emerging wave and tidal technologies and, with the correct level of government support, we can become a global centre of excellence in both the deployment of these technologies and their accompanying supply chains.”

The launch of the new fund was welcomed from across the finance sector.

Simon Brooks, European Investment Bank Vice President said: “Today’s launch of the Renewable Energy Investment Fund marks an important step in low carbon innovation in Scotland and will help attract additional funding to the sector. The European Investment Bank welcomes the launch and recognises the important contribution of renewable energy to a low carbon future. We look forward to continuing to provide complementary support for key renewable energy investment in Scotland.” 

Nial Gemmell, director, specialist debt finance, Scotland, for Barclays commented: “The finance industry needs the Renewable Energy Investment Fund to stimulate the investment market, build confidence for future investments and create projects that can mature into the mainstream finance market. We are pleased to see the Scottish Government taking such steps to develop the fund and create a pipeline of projects that will potentially be of interest to the finance market.”

Jeremy Biggs, CEO, Narec Capital Ltd, added: “The Renewable Energy Investment Fund has come at a critical time in the evolution of renewable energy projects.  Its ability to pull through projects from the earlier stage to reach a point of commercial viability will help bridge an acute equity gap and stimulate the entire industry.”

Malcolm Chilton, managing director, Covanta Energy Limited, said: “The Renewable Energy Investment Fund is a welcome step in the right direction to give encouragement to develop projects and prompt major investment that will benefit the environment and the economy during a period when traditional sources of funding are risk adverse.”

The launch of the REIF comes less than a year after the UK Treasury agreed a Scottish Government proposal to release half of the £206 million Fossil Fuel Levy surpluses generated from Scotland’s energy industry to invest in renewables projects, with the remainder being made available to capitalise the UK Green Investment Bank.

The Scottish Low Carbon Investment conference takes place on October 10 and 11 at the Edinburgh International Conference Centre, bringing together executives from UK and overseas energy and finance firms and senior government figures.

[mappress]

Press release, October 10, 2012; Image: Scottish Government