UK May Seek EU Permission To Keep Coal Plants Open Longer
Investment may not flow into the UK energy sector for several years because so much uncertainty remains over new policies, a leading renewable energy investment boutique has warned. The Government may end up having to seek EU permission to keep coal plants open longer to plug a capacity gap, Simm suggested.
Ian Simm, chief executive of Impax Asset Management, which has almost £2bn of assets under management, said it would like to invest in UK wind farms – but the policy framework was currently too complex and unclear. “We are waiting to see what the landscape looks like,” he said.
The Energy Bill, intended to drive £110bn investment in new low-carbon power to keep the lights on this decade, was introduced to Parliament this month [DEC] but is unlikely to gain Royal Assent until the end of next year.
Impax has a private equity investment arm specialising in funding the construction of renewable energy projects but currently does not invest in the UK.
“We would be very keen to jump into the UK once the Bill has been sorted out. But the situation is currently so complex that it is going to take several years to work out what the market looks like,” Mr Simm told The Daily Telegraph.
“The detail is going to be in the secondary legislation and it’s the detail that will determine whether lenders are willing to lend to projects.”
Even once legislation was passed “people will try to do things and no doubt find complications” he said.
The heart of the Energy Bill is a new system of guaranteed long-term power price contracts, which will ‘top up’ the market price. But many details remain unresolved above how they will work.
Mr Simm said the web of proposed legislation was “phenomenally complicated”.
“There are a lot of projects backed up because nobody will fund construction.
“The development activity which should be taking place now for onshore and offshore wind in particular is going to slow down because developers are not certain of the economic of their projects.”
“It could work and if the details are right it should unlock a huge amount of capital. But it’s hard to see, from the current vantage point, when that will happen.”
He suggested that investors might not feel confident until around 2016 – the same time that capacity margins in the UK are forecast to tighten significantly increasing the risk of blackouts. The Government may end up having to seek EU permission to keep coal plants open longer to plug a capacity gap, he suggested.