Loss of EIB funding threatens UK energy transformation

Loss of EIB funding threatens UK energy transformation

The European Investment Bank (EIB) has funded UK energy projects to the tune of €9bn over the past five years, but at its annual press conference in January, president Werner Hoyer cast doubt that this will continue once Article 50 is triggered.

What is the EIB and how has it benefitted the UK?

Separate to the European Central Bank, the European Investment Bank is a non-profit, long term lending institution, which aims to finance viable capital projects which further EU objectives.

Among its six priority areas are environmental sustainability, development of trans-European energy networks and sustainable, competitive and secure energy supply.

Founded in 1958 when the Treaty of Rome came into force, the UK became a shareholder of the EIB in 1973.

Since then, nearly 1400 loans totalling €116bn have been made to UK projects including hospitals, social housing, telecoms and energy.

What investments have been made in the energy sector?

EIB loans

Starting in 1974, EIB loans have been made to many sectors within the UK energy industry, typically for 25-40% of project requirements, and in the words of the European Investment Bank “effectively attracting other investors”.

Since the financial crisis of 2008, and as the energy transition has accelerated, the amount of EIB lending to the energy industry has increased, with the largest loans supporting offshore wind generation, electricity transmission network upgrades, gas distribution and smart meters.

EIB lending

This marks a change in emphasis, as early loans were made to support nuclear fuel reprocessing and waste vitrification at Sellafield, gas and oil production and nuclear generation.

The development of Dinorwig pumped hydro and the Isle of Grain LNG import terminal have also benefitted from EIB loans.

Small and medium sized projects have particularly benefitted from an EIB scheme to assist them in securing finance in tighter credit conditions.

What happens now?

The EIB plans to deliver €100bn of climate action finance over the next five years, while the UK National Infrastructure Plan in 2016 reported a pipeline of energy projects requiring £117.4bn funding by 2020/21.

This covers investments in nuclear, gas, biomass and offshore wind generation, interconnectors to France Norway and Belgium, smart meters and energy efficiency – all crucial energy infrastructure improvements.

As the EIB is owned by the 28 EU member states, the UK status as shareholder is currently in limbo –  the UK government’s Brexit White Paper made no reference to the EIB.

If there is no deal on the UK continuing a relationship with the EIB as it leaves the EU, not only will an alternative to the EIB loans need to be found, but also for the critical role it plays in attracting additional private finance.

Without this access to investment, the UK will struggle to finance and build the 21st century energy infrastructure that it urgently needs, and on which business depends to manufacture goods for export and the services on which our economy depends.

Utilitywise

Posted by on Monday, the 6. February at 17.04

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