* Early funding to focus on offshore wind, waste, efficiency
* Green bank to borrow money from April 2015
* Funds sceptical GIB projects can meet 2020 targets
(Adds details, background, fund reaction)
By Karolin Schaps and Gerard Wynn
LONDON, May 23 Britain's Green Investment Bank
(GIB) will start lending money to fund low-carbon energy
projects from April 2012, a year earlier than initially planned,
Deputy Prime Minister Nick Clegg said.
"Possible early priorities for the bank are offshore wind,
waste, and non-domestic energy efficiency," Clegg said in a
speech to the Climate Change Capital advisory group in London on
The bank is also set to borrow money from April 2015
onwards, provided that national debt starts falling as a
percentage of Britain's Gross Domestic Product (GDP).
Britain needs to invest around 200 billion pounds ($324
billion) by 2020 in greener technologies so it can meet targets
to reduce greenhouse gas emissions by 34 percent below 1990
levels and generate 15 percent of energy from renewables.
The UK government has guaranteed 3 billion pounds to fund
the startup of the GIB, the world's first national bank
dedicated to green project financing, which is seen as a funding
tool for the transition to a low-carbon economy. [ID:nLDE72M1O0]
"There are capital funds that want to invest in the green
economy, and firms bursting to grow but desperate for funds. The
role of the Green Investment Bank is to close the gap between
the two," Clegg said.
The bank will initially make funding decisions under interim
arrangements that Business Secretary Vince Cable is expected to
announce in more detail shortly.
The first stages of the government's Green Deal, a programme
to improve domestic energy efficiency by helping the funding of
items such as loft insulation, may also be financed using GIB
"The government cannot create a green economy by itself.
Only business and investors can do that. We need you to embrace
these changes and seize the opportunities they present," Clegg
The government estimates the initial 3 billion pounds of
investment may raise an additional 15 billion pounds in capital.
INVESTMENT FUNDS QUESTION TIMING
Some fund managers say the GIB is more about the long-term
and in particular doesn't help projects in financial limbo
awaiting details in the coming weeks of UK electricity market
"If there's no borrowing until 2015 then it implies the GIB
as a source of a significant amount of capital goes on the
backburner as a medium-term prospect," said Ian Simm, chief
executive of Impax Asset Management, which has 2.4 billion
pounds under management in environmental markets.
"Meanwhile the issues around electricity market reform and
what happens to the renewables obligation in particular are very
current. There's already a significant slowdown in UK projects
getting financed until everyone hears back on what the
government intends on that."
Next to proposals for the GIB, Britain is making plans to
reform its electricity market to encourage more investment in
low-carbon forms of power, such as wind and nuclear energy.
Proposals include changing preferential support tariffs,
including the renewables obligation mechanism, for types of
power generation which emit little or no carbon.
The plans are set to be presented to parliament before the
summer recess, which starts in July.
(Reporting by Karolin Schaps, editing by Anthony Barker)