First published in the Quoted Cleantech Newsletter April 2010. Copyright Cleantech Investor Ltd. 2010

by Nigel Hawkins

UK markets are currently being heavily influenced by the forthcoming General Election.

Uncertainty has grown since the commanding lead of the Conservative Party has shrunk in recent months. In consequence, bookmakers are split between forecasting a small Conservative Party majority and a hung Parliament, which could mean Gordon Brown remaining as Prime Minister.

Last week’s Budget gave the Labour Party a final chance to shape its economic policy. Whilst it is true that the public sector net borrowing forecast for this year fell by £11 billion, the projected £167 billion deficit still remains enormous – a similar figure is inked in for 2010/11, although deep public expenditure cuts are widely expected after the Election.

Whilst most of the Budget focused on macro-economic factors, there were some announcements that directly impact the cleantech sector.

At a general level, the Government outlined its aim to reform the energy market in order to provide clean, secure and affordable energy in the long term.

A further Energy White Paper is promised for 2011. And, during this summer, there will be consultations on the appropriate financial mechanisms to provide greater long term certainty for low-carbon investment.

More specifically, the Budget flagged the launch of UK Finance for Growth, which streamlines the Government’s financial support for SMEs, including the available help for commercialising low-carbon technologies.

Furthermore, it was confirmed that up to £60 million will be set aside to develop port sites, which are suitable as bases for constructing – and maintaining – offshore wind plants.

Not surprisingly, there was also an announcement that a Green Bank would be established, with a mandate to invest in low-carbon infrastructure. A similar proposal was put forward by the Conservative Party in its recent energy report.

Given that the Conservative Party may be in government within the next two months, there is considerable interest in its energy proposals which were announced in mid-March.

Of its twelve key actions to re-build energy security, three referred directly to renewables. Aside from the Green Bank proposal, the general principle to develop renewable energy is reaffirmed.

Meanwhile, there is considerable criticism of the existing Renewables Obligation system, which was described as “another risk-laden and expensive incentive mechanism for investment”.

Whilst there is no plan to backdate the replacement of Renewable Obligation Certificates (ROCs), the Conservative Party clearly favours the introduction of Feed-in Tariffs, which it describes as “providing a more stable, certain and straightforward revenue stream for energy developments – thereby reducing investor risk and lowering the cost of capital”.

The other major Conservative commitment on green issues is the plan to reduce demand by offering every household a Green Deal on energy efficiency.

Whether these proposals are put into effect after the election – and, if so, whether they are effective – remain to be seen.  

Encouragingly, though, supporters of offshore wind, which is widely seen as being very risky, would have been heartened by a recent announcement from General Electric (GE), the US behemoth founded by the father of the electricity industry, Thomas Edison.

GE has announced its plan to build a new wind turbine factory in the UK as part of its proposed £300 million offshore wind investment programme in Europe: the Budget announcement relating to improving port facilities is clearly linked to this investment project.

The managing director of GE in the UK, Magued Eldaief, said: “We believe offshore wind has a bright future here in the UK and are delighted that the Government is committed to further developing this sector.” Praise indeed.

In short, a busy few weeks for renewables – they are also expected to feature prominently in the election campaign itself.

Nigel Hawkins is a Director of Nigel Hawkins Associates, which specialises in the provision of investment and policy research.