RENEWABLE ENERGY – OPENING THE DOOR FOR INVESTMENT

With Roger Federer equalling Pete Sampras’ amazing achievement of a seventh Wimbledon title the excitement at the All-England club is over for another year. But when Sampras reached those heights, he opened the door for others, like Federer, to move forward to excel further.  On a more British sporting note, this was also demonstrated in 1954 by Sir Roger Bannister who, after numerous attempts to break the four minute mile, showed real dedication and overcame the propagated myth that it couldn’t be achieved, and broke the record in a time of 3min 59 seconds which was promptly broken the same year.

Sport isn’t the only sector where tenacity and dedication are required to overcome a tipping point.  In a world of volatile markets and low bond yields, pension fund managers are looking for alternative asset classes to deploy their funds.  Thanks to its government backed, index linked returns the renewable energy sector has appeared on the radar as a real opportunity for investment.  With an estimated requirement of £250 billion in the UK low carbon sector over the next 10 years to meet European renewable energy targets, there is also plenty of volume to attract pension funds. 

The heralds of broader investment have been coming for some time with transactions such as the Dutch pension fund service provider PGGM investing in the Walney offshore wind farm.  More recently the acquisition of a majority stake in a portfolio of Irish onshore wind farms by the Irish Infrastructure Fund (a subsidiary of Irish Life & Permanent Plc) indicates that, like Bannister, a small number of pension funds are setting the pace and unlocking the gates for wide scale involvement and investment in this sector.
 
We work in the renewable energy corporate finance team at Ernst & Young and have widespread industry experience advising governments, utilities and private developers across a range of technologies from offshore transmission infrastructure to onshore wind and biomass. 

Over the coming weeks and months we will be providing concise insights into the UK renewable energy industry. The next article will provide an overview of the UK renewable energy industry focussing on the micro and macro drivers, market size and what the market can offer to pension funds.

[Please note that all opinions expressed in this blog are the author’s own and do not constitute investment advice.  Click here for full disclaimer]

Author: Tom Fletcher / Rob Hayward

Tom is an energy corporate finance specialist with a green twist. He works within Ernst & Young's market leading renewable energy team on a wide range of technologies from nuclear and biomass through to onshore wind and offshore grid connection. Whilst all falling under a low-carbon umbrella his clients span government regulators, utility companies and individual site developers. Tom started his finance career with British Energy at the 1.2GW Sizewell B nuclear station. He holds a degree in Economics from the University of Cambridge and is a Chartered Accountant.