The UK’s Green Investment Bank (GIB) has provided backing to a large scale Combined Heat and Power (CHP) plant at a paper mill in Kent by committing £80m of debt to the project. The CHP will generate energy from waste and will replace part of the gas-fired steam supply at the paper mill, while exporting electricity to the grid.
By replacing the use of fossil fuels, the CHP plant is expected to save 163,000 tonnes of greenhouse gases per annum and to prevent 500,000 tonnes of waste from going to landfill. The waste will be provided by a number of local and national waste management companies. During the construction of the plant, about 500 jobs are expected to be created and once the plant is completed, around 40 full-time operational roles will be in place.
The project developer, Wheelabrator Technologies Inc (WTI), has secured more than £300m of loans from a group of lenders that, as well as the Green Investment Bank, includes Barclays, Bank of Tokyo-Mitsubishi UFJ (BTMU), Natixis, and Investec. The project will also receive support from the Contract for Difference (CfD) scheme and is one of 27 renewable energy projects to have secured funding from the first round of the Department of Energy and Climate Change’s £315 million auction announced in February 2015.
Under a CfD contract, a generator is paid the difference between an agreed ‘strike price’ and the average market price for electricity in the GB market. The purpose of the scheme is to give greater certainty and stability of revenues to electricity generators by reducing their exposure to volatile wholesale prices while also protecting consumers from paying for higher support costs when electricity prices are high.
Speaking of the GIB’s support of the CHP project, Greg Clark, Business and Energy Secretary, said:
“As well as creating hundreds of construction jobs, this latest investment by the UK Green Investment Bank is an important contribution towards combating climate change and building an energy infrastructure for the 21st century that is cleaner, secure and affordable. It also shows that the green economy continues to attract finance for projects like this.”
The UK’s GIB was created and funded by the UK Government, with the purpose of backing green projects on commercial terms across the UK and to mobilise other private sector capital into the UK’s green economy. It has so far backed 79 green infrastructure projects, which has committed £2.6bn to the UK economy. Projects have ranged from large ones with a capital expenditure of more than £1bn to small ones of £2m. In March 2016, the Government announced plans to privatise the GIB as a means of enabling it to forge ahead with ambitious plans, reduce the cost to the government, and to free the bank from the EU’s state-aid rules. However, the original deadline of the end of July for buyers to submit their bids for the bank has now been extended to early September. Officially, this extension has been attributed to the complexity of the bids, but there is speculation that the newly formed cabinet may be considering whether to at least maintain a stake in the bank, which could be an important vehicle to encourage investment in green infrastructure projects and so provide a boost to the economy.