Claire Hack reports on an
event hosted by Finance & Leasing Association which discussed
the role of asset finance in achieving a low-carbon
economy.
Go deeper with GlobalData
Lessors have expressed concern over the perceived
changeability of government subsidies for the feed-in tariff (FIT)
renewable energy scheme.
The government has already said in
its Comprehensive Spending Review that a reassessment of the FIT
scheme, due to take place in April 2012, could be brought forward
to this year if there is a higher than expected uptake.
It is not yet known exactly what
shape the government’s review of the FIT scheme will take, but it
is thought rates for solar installations could be cut by up to 10%.
Fear also exists that deals could move from being profitable to
loss-making.
A perception that the FIT scheme is
likely to change could discourage those looking to invest, thereby
reducing financing opportunities for lessors already operating in
the market.
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By GlobalDataFITs were introduced in April 2010
to help the UK reach its target of 15% renewable energy by 2020.
They are paid to homeowners and businesses that generate their own
electricity through small-scale green energy installations.
Leasing Life understands a reduction in FIT rates is
thought to be a possible outcome of the government review.
Concern over the FIT scheme was
raised at a one-day event in London on asset finance for a
low-carbon economy on 30 March organised by the Finance and Leasing
Association (FLA).
Speaking at the FLA event, Matthew
Harvey, a partner in banking and asset finance at SNR Denton, said:
“There have been small steps to encourage the use of renewable
energy. From an investor’s point of view, we are now looking at the
government pulling back on FITs. That uncertainty is not good for
investors.”
The FLA event revealed that, while
opportunities are available to fund projects such as combined heat
and power and solar energy installations, potential customers
remain wary about investing in the technology.
In response to this wariness, a
spokesman for the Department of Energy and Climate Change (DECC),
which is in charge of the FIT scheme, said: “Britain’s solar
industry is a vital part of our renewables future and our growing
green economy.
“The proposed changes to the
feed-in tariff scheme will ensure a sustainable growth path for the
solar industry. We remain committed to FITs to encourage
small-scale low-carbon electricity generation for households, small
businesses and communities.”
Concerns also emerged over a lack
of accurate information about how much energy specific assets such
as solar panels will save, as well as a lack of standardisation
from one asset to the next.
Alexander Pohl, a climate business
sector specialist at HSBC, said: “If you have standardisation of
technology, it can be easily assessed so that due diligence costs
can come down.
“Now, we have to write each
transaction on its own merits and make sure each one is
commercially viable.”
Alastair Tyler, global head of
strategic asset finance at Barclays Corporate, added that
documentation also needs to be standardised.
Tyler said: “It is absolutely
critical that there is confidence around what we are originating in
terms of assets and cash flows. If there is any obfuscation, then
investors will run scared.
“We are concerned about
underplaying performance risk. It is a message for the government
and utility companies – they have a vital role to play in providing
very clear performance guarantees.”
The DECC has maintained investment will be encouraged through
schemes such as the Green Deal, which aims to establish a framework
to allow private firms to offer consumers energy efficiency
improvements to buildings at no upfront cost, as well as funding
from the Green Investment Bank, expected to total £3bn
(€3.37bn).
See also:
