The Government will provide £3 billion to fund a Green Investment Bank, as part of efforts to make the UK a leader in the low-carbon economy, the Chancellor George Osborne said on 23 March 2011.
He also said up to £1 billion funding would go towards building one of the first power stations in the world with technology to capture and permanently store carbon emissions, to help cut greenhouse gases from electricity generation: Carbon Capture and Storage, "CCS".
The Department of Energy and Climate Change confirmed there would be a second round of CCS projects, with up to four more schemes given the go-ahead, although funding mechanisms had yet to be decided.
And £200 million would go to developing offshore wind technology and manufacturing, and support the upgrade of ports to support the industry.
It is hoped the Green Investment Bank will fund clean energy and low carbon projects, leveraging billions of pounds in private finance.
The new chairman of the Green Investment Bank, Lord Smith of Kelvin, has set out his priorities for the next three years. The bank is being set up with £3bn of public money to help firms finance early-stage renewable energy schemes. With its headquarters in Edinburgh, it will create up to 40 jobs with a further 70 jobs in London.
In his first detailed briefing on the potential of the green bank, Lord Smith laid out five priority areas - offshore wind power, commercial and industrial waste recycling, energy from waste generation, non-domestic energy efficiency and supporting the UK government's "Green Deal".
The Green Deal is designed to help households and businesses improve the energy efficiency of their properties. However, the priority list does not include wave and tidal power because the technology is too far away from being commercially viable. Lord Smith said there were quite a few projects already "in the pipeline". The bank will mainly invest between £50m and £100m on schemes which promise a return of about 3.5%. After three years the bank will have the ability to raise outside capital, and Lord Smith said by that time he hoped there would be a thriving green investment industry. He added that if by then "lots of other institutions are now in this area, big time, competing with us, I will feel the job is very well done". The Green Investment Bank was declared open for business in December 2012.
Most forms of renewable energy are cheap to run after the investment of upfront capital expenditure. Although the economics point toward using investment in renewable energy technology, not all organisations have the capital to invest. The Green Investment Bank may be able to help bridge that gap. Government also recognises the benefit to the community of generating renewable heat and renewable electricity without carbon emissions.
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