One of the few certainties about the Green Investment Bank which is due to open its doors later this year is that it will not be short of prospective customers.
The renewables sector is awash with both companies and individuals who are convinced that their ideas represent the key to saving the planet and making a fortune.
All that stands in the way of progress, they will maintain, is the absence of start-up finance to take their project from drawing board to market.
The advent of the Green Investment Bank will offer them all a ray of hope and queues will start forming as soon as further details are provided of the bank’s structure and location.
Few would dispute that the UK Government’s decision to establish such an institution is a good thing, with an extra cheer for the fact that it is to be headquartered in Edinburgh, together with the asset management and administration functions.
Finding £3billion over the next few years to kick-start it is a significant declaration of intent by the Lib-Dem/Tory administration in the current climate, even if that sum seems like a drop in the bucket when compared to the £200billion which is the price-tag attached to establishing a low carbon energy infrastructure in Britain by 2020.
Therefore, careful thought needs to be given to the question of how and whether the Green Investment Bank is going to make a difference.
And the first decision to be taken will be about what to do with that queue of technology hopefuls which will soon be forming round Charlotte Square or some other Edinburgh address, though might some be diverted to London as that is where the fundraising arm will be. Either way it will be necessary, I fear, to tell most of them to go away.
The crucial point surely is that this is to be a bank and not a fund. A large part of the renewables sector is looking for research and development money without any guarantee of anything useful coming out of the other end. In there somewhere, there may well be great ideas. However, it would be very easy to scatter £3billion around over the next few years in support of technologies which are unproven, uneconomic or both.
While the potential should always exist to identify and support a good idea, the threshold for such acts of faith will have to be set high.
If the GEB is to facilitate a process of transformation, it will be largely by investing in technologies which are known to work, rather than by placing hundreds of bets on ones which might or might not. And the dot-com bubble is the obvious warning of what can go wrong.
So it was sensible that Business Secretary, Vince Cable, in announcing the bank’s impending establishment, identified three initial priority areas – energy from waste, offshore wind generation and non-domestic energy efficiency.
None involves rocket science. The technologies exist. But the pace of progress needs to be intensified if they are going to meet their potential over the next few years.
If the GEB can be used to leverage much larger sums of private money in support of these key sectors, then it will serve a really useful purpose and it will also reap decent returns . . . which is what a bank is supposed to do. That is essential for the future if there is to be a continuous flow of investment.
There are enough loss-making banks in Edinburgh and London without starting another one.
Critics have honed in on the fact that the GEB will not have borrowing powers until 2015. However, Cable responded by pointing out that it is a myth to suggest that there are hundreds of good projects out there just waiting to be funded. Would that it were so. Where projects struggle to raise funds it is generally because their sponsors cannot persuade investors of their credibility. The GEB should not be expected to demand lower standards of reasonable proof.
I think it is necessary to get all of this understood from the outset, lest this new bank becomes surrounded with expectations that it cannot sensibly be expected to meet. The queue of disappointed supplicants could easily turn into a clamour of thwarted entrepreneurs expressing displeasure over the new bank’s lack of largesse towards them unless there is a clear understanding of its role and responsibilities.
We already have enough bloated claims about what the renewables sector is “going to” deliver on jobs as opposed to the rather more modest reality of what it actually is delivering.
Perhaps the most urgent need is to make sure that Britain, and particularly Scotland, attracts more investment into the supply chain instead of allowing renewables to be so reliant on imported technology and equipment.
It is not yet clear whether the Green Investment Bank will have a role in that respect but I certainly think it should be considered as an option.
I always said that the “green revolution” should be about the three Es – energy, environment and employment. And substantial job numbers depend on manufacturing.
Good old-fashioned engineering is the best way to create green jobs and I hope that the new bank can help to make that happen.
