Euan McVicar: Prize guys have the opportunity to win big bucks

The concept of offering a prize for this type of development is not new. What is unusual, however, is the sheer scale of the prize: a pot of 300 million European Trading Scheme ("ETS") "allowances" will be sold on the carbon market to generate the funding for distribution among successful bidders. At the current market price, this equates to a fund of around €4.5 million (3.8m).

Under the scheme, known as the New Entrants Reserve300 or "NER 300", businesses from across Europe will be invited to submit proposals to win funding to assist with the development of at least eight CCS and at least 34 renewable energy projects. The intention is that by offering this incentive to private enterprises, new technologies will be developed and deployed which will help the EU meet its 2020 emissions targets.

This represents a tremendous opportunity for the UK and Scotland in particular to put itself at the forefront of the renewable and low carbon technology sectors. Competition is likely to be fierce across Europe but the prize is significant: in addition to the funding potential, there is also the economic impact to consider. RenewableUK recently published a report claiming that the economic benefit to communities, in the form of jobs, land rents and business rates, for every wind farm development amounted to, on average, 7.9m.

Member states will vet project submissions as a first step, with the Department of Energy and Climate Change (DECC) performing this function for the UK. Those proposals deemed most likely to be successful will then be submitted to the European Investment Bank which will ultimately make recommendations to the European Commission about which projects should benefit from funding.

The criteria upon which NER 300 entries will be judged are relatively complex. A number of factors will be taken into account, including technical scope, financing and environmental impact. Robust, rigorous and realistic assessments will need to be made by bidders in submissions.

The scheme is not without its critics. In light of the ambitious European energy and emissions targets, some commentators have decried the fact that the European Union is only willing to fund 50 per cent of the proposed projects.However, firms with interests in Scotland may have access to additional support: marine projects designed for demonstration in Scottish waters may be able to complement NER 300 funding by competing for the Satire Prize, a Scottish Government marine renewables competition that promises 10m to the winner, or the National Renewable Infrastructure Fund, a 70m fund launched by the Scottish Government earlier this month to encourage investment in port and manufacturing facilities for offshore wind turbines.

Beyond this, it remains to be seen whether traditional financiers take an interest. Our experience tells us that private investment could come from a range of traditional sources, such as banking syndicates and private equity, but that more unusual sources of funding may also be available: by way of example, Google and Ikea have recently made green investments to diversify and boost their CSR credentials. These are interesting times for the renewable energy market and the financial and reputational benefits of being involved from the outset are clear.

The deadline for submitting project proposals to the DECC is 9 February. Members states must submit their proposals to the European Investment Bank by 9 May and the estimated time for Commission award decisions is the second half of 2012.

• Euan McVicar is a partner and head of the energy projects practice at national law firm McGrigors.