Green bank directs £2.3bn into UK energy projects

The UK’s pioneering Green Investment Bank said on Thursday that it had committed £635m to almost a dozen wind, waste and energy-efficiency projects around the country in its first five months.

The deals pulled in another £1.7bn of private funds, meaning that a total of £2.3bn will be invested in 11 UK green projects. The bank, a for-profit body launched with £3bn of public money in November, is the world’s first of its kind.

Some of the projects would have stayed on the drawing board if it were not for the bank, said Vince Cable, business secretary, whose department developed the institution.

He said the most important was the Drax coal power plant in Yorkshire which is to be converted to biomass generation after the green bank put in £100m – matched by almost £900m of private funding.

“It would have closed down because it has to meet European rules on coal use and it wouldn’t have been able to survive,” said Mr Cable. “Private investors were interested but they wouldn’t have gone ahead [without the bank].”

Environmental groups were angered by the bank backing a biomass plant, saying that importing woodchips for such projects would help to speed climate change and risked damaging forests.

The rest of the bank’s projects – ranging from a Wakefield waste-to-energy recycling plant to the Walney offshore wind farm in Cumbria – have proved less controversial. But some investors have questioned the value of a taxpayer-funded bank that invests in safe projects that might otherwise have attracted private money.

Mr Cable agreed the bank had been cautious, but said it had good reasons, because it would have been disastrous had it invested in “a couple of lemons to start with”.

“Everybody would have said, ‘Forget it – typical government,’ ” and future governments would have ditched it, he said.

Australia’s A$10bn (£6.5bn) Clean Energy Finance Corporation is the closest comparison to the UK’s green bank, but it is not due to start making funding commitments until July.

Andrew Cuomo, New York state’s governor, said in January he wanted to set up a $1bn green bank to spur clean energy investments.

By the time those two banks are up and running, the UK green bank is likely to have committed millions more, under the direction of Shaun Kingsbury, its chief executive.

Running the bank will present challenges. Its headquarters are in Edinburgh, while almost half its staff, including many of its investment specialists, are in London.

Mr Cable defended the unusual structure. “The world doesn’t begin and end in London,” he said. “There are many organisations that operate outside London in the financial sector. I don’t see a problem with that.”