‘As a nation, we are rich in energy resources and this provides a tremendous opportunity to fuel our drive for a fairer and more prosperous Wales and to achieve a better quality of life for our own and future generations’.
This statement comes directly from the First Minister’s foreword to Welsh Government’s ‘Energy Wales: A Low Carbon Transition’. Renewable energy across Wales has the potential to substantially boost the Welsh economy and significantly help Wales to meet its climate change targets, however accessing funding for projects across Wales is currently one of the biggest barriers to achieving this potential as outlined in a report published today by the Institute of Welsh Affairs.
The report ‘Funding Renewable Energy Projects in Wales’ highlights the missed opportunities and the main barriers to being able to raise financial capital from within Wales for renewable energy schemes in order to ensure that wider economic and social benefits are retained locally. It is the first report to be launched as part of the IWA’s ‘Re-Energising Wales’ project which will set out a plan to enable Wales to meet its projected energy demands entirely from renewable sources by 2035.
In its 18 recommendations, the report highlights a range of opportunities and investment options that could help raise financial capital from within Wales to support renewable energy projects. Wales needs to reach its renewable energy potential by taking advantage of its ‘abundance of natural resources’ and should do so by investing in a way that ensures wider economic and social benefits are retained locally within Wales. Welsh Government, pension funds, local government, private sector and third sector organisations all have important roles to play in this and joined up thinking is required to make it happen.
Significant numbers of potential renewable energy projects in Wales have struggled to go ahead and obtain sufficient funding due to cuts in subsidies and other factors. Furthermore, significant recent projects have struggled (or not attempted) to attract Welsh capital funding, with profits then flowing outside Wales. However, there is money in Wales that could be used to invest in such projects. Local government pension funds, for example, have a collective investment of £13 billion. A significant proportion of this £13 billion is invested outside of Wales and not directly in Welsh assets. Local government pension funds in the UK invest over £14 billion into fossil fuel companies, and Welsh councils invest £739 million of their pension funds in fossil fuel companies. Local government pension funds currently held around Wales are an obvious resource that could, in part, be invested into renewable projects.
The report also argues that a lack of ambition, of strategy, of long termism is currently holding back investment in Wales. Welsh Government in particular have a number of levers that they could use to stimulate investment, including to name a few, powers over business rates relief which could drive community participation in renewable energy schemes and also the ability to develop a sustainable energy strategy in order to create a sustainable energy project pipeline to help provide investors with confidence that investable projects will be forthcoming.
Certain levers to stimulate investment are within the control of the UK Government including renewable energy subsidy setting which supports deployment of renewable energy technologies. The report makes the case for Welsh Government, in the short term, to lobby the UK Government to ensure that subsidies are more favourable than they currently are to renewable energy technology types suitable to Wales. Looking more towards the long term, the report makes the case for a range of partners to strongly explore the need to devolve a range of powers over renewable energy subsidy setting to Wales, so that Welsh schemes are not susceptible to UK Government policy and subsidy changes.
Central to the theme of the report is the need for more community-owned renewable energy schemes. One of the report’s recommendations calls on Welsh Government to support the development of a new cooperative, charitable or not for profit body which has a clear brand and supports investment in Welsh renewable energy projects, with an aim to establish the body by the end of 2019. The IWA considers that this entity could be an obvious local partner for developers and investment platforms such as Abundance to build significant renewable energy sites, creating joint investments. This body could develop projects that are wholly community owned and also facilitate shared ownership opportunities on larger scale energy projects.