Scott Wright, Deputy Business Editor
A CORPORATE financier has drafted a paper outlining how Scottish
communities could directly benefit from renewable projects by investing in
a green energy bond.
It marks the first significant work to set out how such a bond, mooted by
Scottish ministers in their 2016-17 programme for government, would work in
practice.
Simon Robinson, a consultant with significant experience of helping firms
raise finance to build wind farms and offload renewable assets, explored
the practicalities behind the idea after holding talks with Scottish
Renewables.
It comes with the Scottish Government committed to having one gigawatt (GW)
of renewable capacity under community and local ownership by 2020. The
previous 500 megawatt target has already been exceeded.
Mr Robinson said a green energy bond has the potential to allow the public
to directly benefit from community ownership in renewable energy projects,
boost investment in renewable infrastructure, and help the country meet its
renewable energy targets.
“I think there is an enormous opportunity to use that manifesto commitment
to do something incredibly positive,” Mr Robinson said. “And also, it is
fair to say, to really differentiate the direction of energy policy and
empowerment of local communities in Scotland, compared to what is happening
in the rest of the UK. I’d love to see that taken advantage of.”
Mr Robinson, who runs the Edinburgh-based Snell Bridge consultancy, does
not envisage using the funding raised by the bonds to bankroll new projects.
He proposes that the funding should be used to acquire assets in the form
of mezzanine debt held in existing schemes by the Renewable Energy
Investment Fund (REIF), run by the Scottish Investment Bank.
Those assets would then be transferred to a new fund, the Scottish
Community Energy Fund, which would be open to direct investment by the public.
Mr Robinson said this would allow people to invest in income generating
assets from “day one”.
“We know there are some assets there, some loans that are generating
income, therefore there is potentially the opportunity to use those as a
seed portfolio to start off this fund,” he said.
And while he admits more detailed analysis has still to be carried out, Mr
Robinson suggests investors could see returns of as much as six per cent
annually on their investments. He also flagged the possibility of including
te green energy bond within an “innovative finance isa” (individual savings
account).
“There’s definitely an opportunity to produce more [of a return] than a
bank base rate,” he said. “In terms of the return they are making, I would
have thought they would be typical mezzanine debt type returns, so there
will be a slightly higher interest rate than the banks.
“I estimated in the paper that it might be possible to pay a four to six
per cent annual return after costs to the underlying investors. In this
market that could be interesting.”
Scotland already has a raft of community-owned wind farms, including the
Neilston Community Wind Farm in East Renfrewshire, the Isle of Lewis
Community Energy Project, and the Spirit of Lanarkshire renewable energy
co-operative.There are also a range of hydro projects in community ownership.
Mr Robinson sees his paper as the opportunity to shape renewables policy as
more inclusive, innovative and empowering in Scotland than in the rest of
the UK, highlighting the difference in rhetoric between Holyrood and
Westminster on the topic.
The UK Government cut the subsidies for new onshore wind projects following
a pledge by the Conservative Party ahead of the last general election, and
brought the Renewables Obligation to a close a year earlier than planned.
Mr Robinson said: “It increases the salience of community energy amongst
the wider public, which I think it is incredibly important.”
“From a personal point of view, I’d like to start the debate. I’d like to
sit down with some like-minded people, and hopefully members of the civil
service and talk about how we can deliver something really exciting.”
Jenny Hogan, director of policy at Scottish Renewables, said: “Scottish
Renewables called on the Scottish Government to consider opening up
ownership of renewable energy through the creation of a Scottish Renewable
Energy Bond, so we were pleased that it has since announced it will consult
on plans to deliver such a bond in 2017.
“Snell Bridge’s paper is a valuable contribution to the debate, and should
help the Scottish Government and other interested parties to consider how
best to widen the benefits of renewable energy to more people across Scotland.”
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