Lenders put off investing in onshore wind due to UK Government cuts
New research has shown for the first time that recent announcements from Whitehall are having a significant impact on investor confidence and their ability to lend to onshore wind farm developers.
EY, on behalf of Scottish Renewables, carried out a survey of major lenders to the renewable energy sector which confirmed the industry’s concerns that banks had become reluctant to finance projects. The survey targeted a sample of active onshore wind investors asking them about their willingness to lend to projects in the aftermath of the UK Government’s announcements to close the support mechanism called the Renewables Obligation (RO) in 2016 instead of 2017 as previously planned.
More than half of lenders who responded to the questionnaire said they weren’t prepared to lend until the UK Energy Bill had received Royal Assent, not expected until next year, largely due to the current political and regulatory risk concerning the RO, and the lack of guidance on the process and timing of the Energy Bill amendment through parliament.
Michael Rieley, Senior Policy Manager for Scottish Renewables, the industry body for Scotland, said: “The UK Government’s decision to remove financial support for some onshore wind farms a year earlier than planned has had a clear and negative impact on the ability of developers to attract finance to their projects.
“Our members have already expressed concern that they were entering an investment hiatus and this survey of lenders would indicate their suspicions are well founded.”
Mr Rieley continued: “With the decision to end support a year earlier than planned, around two gigawatts of onshore wind projects in Scotland have been put at risk. These are projects that could bring around £3 billion pounds of investment and provide enough generation to meet the equivalent electricity demand of 1.2 million Scottish homes.
“If we are to avoid losing the benefits of this scale of development in Scotland, the UK Government must allow those developers that have already made significant progress with their projects to continue them as part of the RO scheme.”
Matthew Yard, Assistant Director at EY, said: “The results of the survey indicate that raising project finance for UK onshore wind RO projects has become more complex, more expensive and increasingly difficult since the announcement of the early closure of the RO. Those banks that have indicated they are considering lending to UK onshore wind RO projects are now seeking better terms and some form of mitigation against a situation with no RO revenue.
“As we move closer to the RO accreditation end date, the ongoing uncertainty makes it harder for projects and sponsors to raise senior finance”.
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