The European Investment Bank (EIB) will provide up to £700 million of the new finance, with the remainder matched by RBS (Royal Bank of Scotland), Lloyds Banking Group and BNP Paribas Fortis. The plan has the support of the UK Treasury and the Department of Energy & Climate Change (DECC).
“The money that is being made available will help continue the essential work of building the UK’s capacity in renewable energy,” says Chancellor Alistair Darling. “This government is determined to provide all the support that is needed to secure a greener future.”
The loans will be available to eligible onshore wind projects with a total project cost of £20 to £100m. The eligibility criteria will ensure that wind energy projects have an acceptable environmental impact and are located in commercially viable locations in terms of wind resource.
"The UK now has 4 GW of wind capacity and the pace of installation is picking up,” adds energy secretary Ed Miliband. “It took us 14 years to build the first gigawatt and just one year to build the last.”
“But we still need a six-fold increase in renewables by 2020 to hit our renewables target,” he adds. “That target is vital if we are to be on course to cutting emissions by 80% by 2050 so we need to pull out the stops, including making sure the capital is there to build the wind farms in the first place.”
As part of a wider package supporting investment and the low carbon sector, the latest UK budget said "UK renewable and energy projects stand to benefit from up to £4bn of new capital from the European Investment Bank through direct lending to energy projects and intermediated lending to banks. The government believes that this initiative can bring forward £1.4bn of consented small and medium-sized UK renewables projects to deployment."
"The EIB's contribution to transforming wind energy generation in the United Kingdom is a core element of our support for renewable energy technology across Europe,” explains Simon Brooks of EIB. “We are sure that targeted support, following UK and European Union policy combatting climate change, will facilitate rapid and sustained investment in the industry and promote continued transformation to a low-carbon economy."
The EIB is the European Union’s long-term financing institution which supports projects promoting EU objectives in energy and climate change mitigation, among others. In the past five years (2004 to 2008), it lent £13bn for projects in Britain.
DECC and HM Treasury welcome the EIB’s intermediated lending scheme in the UK, targeting the deployment of small and medium sized onshore wind. This segment of the renewables market has struggled to access project finance in recent months as a result of tighter risk management resulting in liquidity shortage, the department explains. Improved liquidity in the project finance market should help developers bring forward otherwise economically viable projects which are at risk in the current economic conditions.