The GIB Commission, chaired by former Merrill Lynch chairman Bob Wigley, published a report in July that recommended how the UK can accelerate private-sector investment in the low-carbon transition.
The report concludes that a capital base of £100-£400 million could unlock an additional £3 billion of finance a year - enough to bridge the finance gap for offshore wind in 2013. This capital base would need to grow over time, perhaps adding three times that amount of capital in 2016 and unlocking closer to £10 billion of extra capital in that year, the commission notes.
The commission, which was established in February, has identified financial products that could be used to trigger private-sector investment in low-carbon technology.
For offshore wind, it recommends contractor default letters of credit. These would give developers confidence that a claim against any contractor due to a delay or cost overrun would be honoured immediately. This would help reduce the risk of claims failing due to disputes between contractors as to responsibility for overruns. The commission suggests that this should be provided for 20-40% of the total cost of the project.
Another product it suggests is extreme-events insurance. This would cover events not typically covered by a contractor's liability; for example, poor weather stopping construction for more than 30 days in the summer build season or unforeseen seabed conditions requiring greater foundation work. Such a policy could provide cover for 20-40% of total cost overruns, the commission recommends.
These products offer attractive ratios of capital compared to the finance unlocked.
The commission recommends that the bank is set up within six months. But energy minister Greg Barker, from the UK's new coalition government of the centre-right Conservatives and centre-left Liberal Democrats, says proposals will be brought forward in the autumn after a comprehensive review of public sector expenditure.
Funding will also be confirmed then. The previous centre-left Labour government committed £1 billion of public-sector capital to a GIB, but the new administration has been silent on this.
The Department for Energy and Climate Change did, however, announce £10 million in grants to eight companies to improve the supply chain for offshore wind.
Meanwhile, millions of pounds earmarked for refurbishing shipyards in the north of England to boost their capacity to manufacture offshore wind turbines could escape the government's public-spending cuts.
The coalition has embarked on a programme of austerity, with deep spending cuts across the public sector. Ministers have said they will review all spending commitments made by the previous government since the turn of the year, including the £60 million ports-refit pot and, until now, there has been no mention of the fate of the funding.
Speaking to “uåX˜äŠÊ˜·³Ç at a July conference, climate secretary Chris Huhne said the funding was still on the radar.
Huhne added that this would be included within the spending review process. "That's why it is called a comprehensive spending review," he said. "We're including everything and funding for port refits will be in there."
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