Bank plan 'not best way to raise green investment'

A CORPORATE finance adviser working in the energy sector has questioned the viability of the government's proposed green investment bank.

Colin Welsh, chief executive of Simmons, has warned that companies will not see much of the 1 billion fund being promised and said it would be better to use the tax system to lure investors into renewables.

"The significant costs of setting up and running such a bank would be better invested in the companies directly," he said. "I would anticipate only a small proportion of the government's pledged 1 billion will actually reach the companies that need it."

Welsh said he welcomed initiatives that foster investment in the country's long-term energy security but believes that there are simpler and more efficient ways of stimulating investment .

An effective alternative, he said, would be for the government to provide tax incentives in the form of 100 per cent relief to attract individuals to invest in early stage renewable businesses.

"New or early stage businesses need business acumen as well as money. If experienced business people were encouraged to invest their own time and money through tax relief, we would soon see a step-change in renewable business."

He added: "There is no shortage of private equity money and investment funds to invest in mature renewable projects and technologies.

"It's the small technology start-ups that need help but the problem is that the amounts of money required are relatively small and hard to raise through conventional financing processes. The costs of the operational, financial and legal diligence, and other paperwork that is part and parcel of making any investment by a third party are disproportionately high relative to the investment."

One of Welsh's main concerns is the government's capability to run an investment bank. "Government-backed entities have a very poor track record when it comes to making investments on behalf of the public purse," he said. "This is largely due to the fact they struggle to hire the best people with the right experience and they get bogged down in the red tape that plagues all government bodies."

He is also concerned that the issue of sustainable energy and security of supply is not joined up. "We need a common-sense, joined-up approach which does not simply pander to environmental lobbyists.

"A good place to start is with the recommendations outlined in the oil and gas industry's Task Force Report - an excellent and independent piece of work that, to date, has been conveniently ignored.

"And why confine the encouragement of innovation in energy to renewables when it could be extended to include technologies which enable more oil or gas to be recovered from reservoirs, or which can be shown to make the process of exploiting conventional energy sources more efficient and safer?"