Energy Eye - August 2013

This Update contains brief details of Government and EU publications, legislation, cases and other policy developments in England and Wales relevant to those interested in energy, renewables, energy efficiency and the alternative energy sector, which have been published in the past month.

14/08/2013

Nadeem Arshad

Nadeem Arshad

Partner

This Update contains brief details of Government and EU publications, legislation, cases and other policy developments in England and Wales relevant to those interested in energy, renewables, energy efficiency and the alternative energy sector, which have been published in the past month.

Items are set out by subject, with a link to where the full document can be found on the internet. All links are correct at the date of publication.

If you have been forwarded this update by a colleague and would like to receive it direct please email Claire Booth.

The following topics are covered in this update:

   Biomass    Green Deal and ECO
   Combined Heat and Power    Infrastructure
   Community Energy    Procurement
   Electricity Market Reform    Renewable Energy
   Emissions Trading    Shale Gas
   Energy Efficiency    Smart Meters
   Energy Policy    Wind Energy

Biomass

DECC: Government response to the consultation on the Renewables Obligation – Notification process for new build dedicated biomass projects: in May 2013, the Government launched a consultation on its proposals for a notification process to allocate places within the 400MW cap on new build dedicated biomass projects under the Renewables Obligation (RO). Projects allocated a place within the cap would be covered by the grandfathering policy, whereby the ROC levels applicable at the time of full accreditation of the generating station would be maintained for the accredited capacity of the station for the entire duration of its RO support. This response summarises the comments received and sets out the Government’s decisions on the issues raised. (31 July 2013)

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Combined Heat and Power

DECC: Government response to the consultation on reviewing the qualification criteria for renewable Combined Heat and Power schemes: in December 2012 the Government consulted on proposals for revising the certification criteria for biomass, bioliquid, biogas and waste fuelled CHP schemes, which determine the eligibility of plant for CHP specific bands under the Renewables Obligation banding arrangements and other forms of Government support. This document sets out the Government's formal response to that consultation. It summarises the revised arrangements that will be applied by the CHPQA programme from 1 January 2014. (12 July 2013)

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Community Energy

HC Energy & Climate Change Committee: Local energy: this report explores the role that medium-sized local energy projects of 10-50 MW could play in the UK's energy system and the extent to which Government policy currently supports these types of development. It highlights how these projects have difficulties accessing support as they currently fall in the gap between Feed-in Tariffs (FiTs) and the new Contracts for Differences (CfDs). it concudes that  medium-sized local energy projects could bring considerable benefits by engaging communities, raising energy awareness and increasing public acceptability of new low-carbon infrastructure but Government needs to do more to support their installation. It calls on the Government to bring forward a package of measures that cover finance, planning, grid access and advice as an incentive to local energy developers. It also recommends that the Government do more to promote joint ventures which benefit both community groups and commercial partners. (6 August 2013)
Bevan Brittan has issued an alert that discusses this report in more detail: A boost for Local Energy schemes.

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Electricity Market Reform

DECC: Consultation on the draft Electricity Market Reform Delivery Plan: seeks views on the draft EMR Delivery Plan, which provides detail on the support mechanism (long-term Contracts for Difference) and draft strike prices for renewables investors, which together will help incentivise up to £110bn of investment in new electricity infrastructure by 2020.  It explains the assumptions underpinning the suggested strike prices and also sets out and seeks views on a proposed reliability standard, which will guide the level of capacity that is contracted for in the Capacity Market. The consultation closes on 25 September 2013. (17 July 2013)

DBIS: Electricity market reform – 'Contracts for Difference' costs exemption eligibility: seeks views on proposals, subject to state aid approval, to exempt energy intensive industries from the costs of Contracts for Difference (CfD) where they pose significant risk to UK competitiveness, as part of a government package to support the most electricity intensive industries. This consultation sets out what the exemption might look like, and seeks views on eligibility criteria. The recommended option is to use the same eligibility criteria as the EU Emissions Trading System and Carbon Price Support indirect costs compensation. This would exempt industries with a total combined value to the UK of approximately £50bn in turnover, employing 150,000 people.  The exemption  will come into force at the same time as the Electricity Market Reform is implemented. The consultation closes on 30 August 2013. (4 July 2013)

DECC: CfD Supplier Obligation – Policy update and response to the call for evidence: the CfD Supplier Obligation will be a statutory obligation on suppliers to make payments to fund the payments that are due under CfDs to generators. The CfD Supplier Obligation Policy update sets out DECC's current thinking on the design of the Supplier Obligation in advance of a detailed policy proposal being published for consultation in the Autumn. It also responds to the call for evidence published in November 2012, covering latest thinking on the design of the Supplier Obligation, the backstops to ensure certainty of payment, along with the next steps. In light of responses, the Government is minded to charge suppliers using a fixed formula-based levy but is awaiting final analysis of the impacts of different forms of the levy. (7 August 2013)

DECC: Electricity Market Reform – Contracts for Difference: seeks views on a number of documents that provide complementary information to the draft Electricity Market Reform (EMR) delivery plan consultation and the EMR Spending Review, namely:

The consultation closes on 2 September 2013. (7 August 2013)

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Emissions Trading

DECC: Joint statement on the EU Emissions Trading System: this joint statement by Energy and Environment Ministers from 12 EU Member States calls for MEPs to support the so called ‘backloading’ proposals due to be voted on in Strasbourg on 3 July, and for the European Commission to bring forward legislative proposals to deliver structural reform of the EU Emissions Trading System (EU ETS) by the end of the year. (1 July 2013)

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Energy Efficiency

DECC: Eligibility criteria for technologies that qualify for the Energy-saving Enhanced Capital Allowance Scheme: updated version of the Energy Technology List which comprises the technologies that qualify for the Energy-saving ECA scheme and their energy-saving eligibility criteria. (10 July 2013)

DECC: Energy Savings Opportunity Scheme: Article 8 of the EU Energy Efficiency Directive 2012/27 requires all Member States to introduce a regime of regular energy audits to promote the uptake of cost-effective energy efficiency measures. These audits must be undertaken by 5 December 2015 and then every four years thereafter. This consultation seeks views on the UK’s approach to meeting this requirement through implementing a new Energy Savings Opportunity Scheme (ESOS) that will require large enterprises (>250 people) to undertake assessments to identify cost-effective ways to invest in energy efficiency. Organisations with fewer than 250 people will also be included if both their annual turnover exceeds €50m and annual balance sheet total exceeds €43m. Public sector organisations are not covered by this new scheme as other parts of the EU Energy Efficiency Directive require public sector action on energy efficiency. The consultation closes on 3 October 2013. (11 July 2013)

DECC: Davey “determined to tackle scourge of fuel poverty”: DECC has set out a new definition of fuel poverty to ensure support is targeted at those who need it most. A household will be defined as ‘fuel poor’ if its:

  • Total income is below the poverty line (taking into account energy costs); and
  • Energy costs are higher than typical.

The Energy Bill will include a new target for fuel poverty that will focus on ensuring that fuel poor households attain a certain standard of energy efficiency in their home by defining an average or a minimum standard for energy efficiency for fuel poor households. (9 July 2013)

DECC: Exploring the use of Display Energy Certificates: this research report explores how Display Energy Certificates (DECs) have been used in energy management and decision-making. The report considers whether the information collected to acquire a DEC raised awareness of energy use and subsequently influenced decision-making and behaviour. (11 July 2013)

DCLG: Energy measures to save £200 annually in fuel bills for a new home: announces changes to Part L of the Building Regulations from April 2014, which will mean new homes and non domestic buildings will have to include energy saving features such as better fabric insulation and more efficient heating and lighting. (30 July 2013)

DBIS: Government commits further investment to innovation: announces investment in two new technology and innovation centres. These new Catapults include an Energy Systems Catapult that will help innovative UK businesses tackle the challenge of creating energy systems that meet future supply and demand, both in the UK and overseas. (13 August 2013)

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Energy Policy

DECC: A 2030 framework for climate and energy policies – UK Government Response to Commission Green Paper COM(2013) 169 final: in March 2013, the EC launched a consultation on a series of questions about the future of EU climate and energy policies, including the priorities for an EU-wide framework and the need for supporting targets for 2030. This response presents the UK’s analysis of the lessons learnt from the EU’s 2020 framework, and its vision for 2030 supported by a reformed EU emissions trading scheme. It states that the UK believes the EU should adopt an ambitious emissions reduction target for 2030,delivered in a flexible, technology neutral way, supported by a robust, reformed emissions trading system, and underpinned by a global agreement in 2015. The framework should be designed to achieve the most cost-effective emissions reductions. (5 July 2013)

UK Energy Research Centre: Transforming the UK energy system – Public values, attitudes and acceptability: Synthesis report: sets out the findings from research into the values and factors that influence people when deciding whether to accept or reject changes to the energy system. The research highlights key factors that influence public assessment of proposed changes. It shows that the public favours changes that are: energy efficient rather than wasteful; protect the environment and nature; are reliable, accessible and safe; allow consumers a certain amount of autonomy and power; are socially just and fair; improve on what has gone before; score well in terms of quality and performance; and, fit with a long-term, sustainable trajectory, rather than being just a short-term fix. The report proposes that energy policies not taking account of these factors in combination are unlikely to secure public support. (16 July 2013)

DEFRA: Sustainable Development Indicators: this revised set of headline indicators highlight sustainable development priorities for users and government. SDIs are national statistics that are used as a means of assessing whether the nation as a whole is developing sustainably, and as a means for policymakers to identify more sustainable policy options. Sections 26-28 cover CO2 emissions, renewable energy and household energy efficiency. (31 July 2013)

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Green Deal and ECO

Green Deal Oversight and Registration Body: Annual report 2012-2013: this report covers the initial set-up phase of the GD ORB service and summarises major events and successes in the set up of the functions and responsibilities for Year 1 of the GD ORB service (from mid-June 2012 to mid-June 2013). It states that the first year of operation has seen key market foundations established to support participants to deliver commercial success in a consumer-driven way. The focus has been on ensuring organisations with high quality standards enter the market and when they do that they are supported in understanding their on-going commitments. (19 July 2013)

DECC: Energy Company Obligation (ECO) – Updates to the Electricity and Gas (Energy Companies Obligation) Order 2012: seeks views on a small number of technical amendments to SI 2012/3018 which sets out the legal requirements applying to obligated energy suppliers in delivering their carbon and notional bill saving obligations. The amendments are designed to ensure that the Order is aligned with changes in the broader policy landscape, and to provide greater clarity on certain aspects of the Scheme to aid its continued smooth delivery. The consultation closes on 16 September 2013. (24 July 2013)

DECC: Green Deal Communities: DECC has announced a new £20m Green Deal Communities scheme to help local authorities drive street-by-street delivery of the Green Deal. Local authorities are invited to come forward with ambitious and innovative street/area based proposals for funding to deliver Green Deal plans to as many households as possible. The funding can also be used to support households who choose to self-finance measures. The closing date for applications is 31 December 2013. (25 July 2013)

HC Energy and Climate Change Committee: The Green Deal – Watching brief: Government Response to the Committee's First Report of Session 2013-14: sets out the Government’s response to each of the recommendations in the Committee’s May 2013 report Green Deal: A Watching Brief. (26 July 2013)

DECC: Green Deal code of practice: revised CoP that sets out requirements for those persons acting as Green Deal Providers, Green Deal Assessors, Green Deal Installers or Certification Bodies. It substitutes and revokes the Green Deal code of practice issued on 25 January 2013. (31 July 2013)

Ofgem: Guidance note for the Carbon Saving Community Obligation – Determining whether a premises falls within an ECO area for the purposes of CSCO: guidance on how to account for postcode movement in ECO areas and how to demonstrate eligibility where a premises is in an ECO area but the postcode is not. (1 August 2013)

DECC: Government response to the May 2013 consultation on the proposal to amend the definition of “debtor” in section 189 of the Consumer Credit Act 1974 for the purposes of the Green Deal: the consultation proposed amending s.189 of the CCA 1974 Act and inserting a new s.189B with a specific definition of debtor to be applied with regards to Green Deal Plans, to give creditors with confidence as to the identity of the "debtor" under a regulated Green Deal Plan. In light of the responses received, the Government will proceed with the s.189B amendment without the reference to prospective bill payers. It also plans to amend the CCA 1974 to provide that a Green Deal Plan will be: restricted-use credit; and a debtor-creditor-supplier agreement, irrespective of whether the improver and the debtor are the same person and hence whether the supply contract and credit agreement are ‘linked’ in the usual sense under the CCA 1974. Further amendments will be made to ensure that other CCA provisions are effective in such cases and there is no diminution in consumer protection. The changes will be made by SI this autumn.
The paper also states that DECC will withdraw the guidance for Green Deal Providers and corporate landlords entering into Green Deal Plans during void periods with the intention that the Plan will be transferred to a consumer tenant, following feedback. DECC will consider alternative approaches for dealing with this situation. (6 August 2013)

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Infrastructure

European Commission: Streamlining environmental assessment procedures for energy infrastructure Projects of Common Interest (PCI): the new EU TEN-E Regulation 347/2013 identifies 12 strategic priority corridors and geographic areas for with a trans-European/cross-border energy infrastructure and sets out a process to establish EU-wide lists of Projects of Common Interest (PCIs) which will contribute towards the development of energy infrastructure networks in each of the 12 corridors. Projects labelled as PCIs will benefit from improved regulatory treatment and faster and more efficient permitting procedure. This guidance supports Member States in streamlining environmental assessment procedures and to ensure coherent application of environmental assessment procedures required under EU law for energy infrastructure PCIs. (24 July 2013)

DfT: Plug-in vehicle infrastructure grants – List of the successful organisations: announces the successful applicants that have been awarded a share of £37m funding to support the cost of installing infrastructure for recharging electric vehicles. It lists the amount of their grant award for the 2013/14 financial year, and an indicative amount for 2014/15 for those organisations whose projects span both years. DfT has also announced that the second rounding of funding is now open – the closing date for bids is 30 October 2013. (31 July 2013)

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Procurement

Cabinet Office: Procurement policy note 07/13 – EU statistics on public procurement annual return for calendar year 2012: reg.40 of the Pubic Contracts Regulations 2006 requires contracting authroities to submit information for each contract or framework agreement awarded during the calendar year where the estimated value is above the threshold of the Regulations (or is otherwise caught by the aggregation rules) and it does not fall within the scope of one of the specified exemptions contained within the Regulations. This PPN requests authorities to submit their annual statistical returns on procurement contracts awarded in 2012. Annual statistical returns should be uploaded onto the Cabinet Office system by 9 September 2013. (8 August 2013).

Cabinet Office: Procurement policy note 08/13 – EU statistics on utilities sector procurement annual return for calendar year 2012: the Utilities Contracts Regulations 2006 require each utility to produce reports on the total estimated value of supplies, works and services contracts awarded by the utility in each area of activity to which the Regulations apply, but where the individual contracts are excluded from the Regulations because their estimated value is below the threshold. This PPN requests utilities to submit their annual statistical returns on utilities procurement contracts awarded in 2012. Annual statistical returns should be uploaded onto the Cabinet Office system by 9 September 2013. (8 August 2013)

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Renewable Energy

DECC: Domestic Renewable Heat Incentive – The first step to transforming the way we heat our homes: sets out the final policy for the domestic Renewable Heat Incentive (RHI), subject to State Aid and Parliamentary approval. The domestic RHI is a financial support scheme for renewable heat, targeted at, but not limited to, off gas grid households. The support will be paid at a set rate per kWh of renewable heat produced for seven years to the owner of the heating system. The tariff levels have been set at: 7.3p/kWh for air source heat pumps; 12.2p/kWh for biomass boilers; 18.8p/kWh for ground source heat pumps and at least 19.2 p/kWh for solar thermal. The paper also details eligible applicants, eligible technologies, tariff payments and scheme requirements. The RHI for householders will be administered by Ofgem and more details on how to apply will be published in due course. DECC is currently finalising the details of the expansion of the non-domestic RHI scheme and will confirm the way forward in the autumn alongside the outcome of the tariff review. (12 July 2013)

DECC: £7m for social landlord renewable heat projects: announces the winners of the Renewable Heat Premium Payment (RHPP) Social Landlord Fast Track competition. 46 social landlords will share £7m to help install a range of renewable heating kit, such as air source heat pumps, ground source heat pumps, solar thermal installations and biomass boilers, into the homes of their social tenants. The full list is on the EST website. (24 July 2013)

DCLG: Planning practice guidance for renewable and low carbon energy: advice on the planning issues associated with the development of renewable energy. It should be read alongside other planning practice guidance and the National Planning Policy Framework. It replaces Planning for Renewable Energy: A Companion Guide to PPS22. (29 July 2013)

Bloomberg New Energy Finance: Profiling the risks in solar and wind – A case for risk management approaches in the renewable energy sector: this report assesses the underlying trends in the renewable energy sector and considers how new risk management and insurance products can contribute to the sector’s growth and long-term sustainability. (25 July 2013)

DECC: Lottery Funding and the non-domestic RHI: sets out how lottery funding and non-governmental loans affect eligibility for non-domestic Renewable Heat Incentive. (7 August 2013)

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Shale Gas

Centre for European Reform: Can shale gas transform Europe's energy landscape?: this briefing concludes that shale gas could slow the increase in Europe's dependence on imported gas, but it will not be the game changer that it has been in the US. (10 July 2013)

HM Treasury: Harnessing the potential of the UK’s natural resources – A fiscal regime for shale gas: seeks views on proposals for a tax regime for shale gas that is designed to unlock early investment and support the development of this new industry. It proposes a "pad" allowance (where a pad refers to the drilling and extraction site) that would reduce the tax on a portion of a company’s production income from 62% to 30% at current rates, and an extension of the Ring Fence Expenditure Supplement from six to ten accounting periods.This new tax regime could also be extended beyond shale gas to all onshore unconventional hydrocarbons. The consultation closes on 13 September 2013. (19 July 2013)

DCLG: Planning practice guidance for onshore oil and gas: guidance for industry, minerals planning authorities and local communities on planning issues associated with the extraction of shale gas (and other onshore hydrocarbons). It aims to provide clarity on the role of the planning system and interaction with the separate environmental and health and safety regimes. (19 July 2013)

DECC: About shale gas and hydraulic fracturing (fracking): sets out common questions on shale gas and fracking with Government responses to these questions. It cautions that as shale gas activity in the UK is still in the exploration stage, the answers to questions about the potential impacts of production operations are tentative or qualified for the time being. (30 July 2013)

Environment Agency: Shale gas exploratory operations – Technical guidance: advice for operators, their consultants and other technical audiences, such as local authority planning officers, on what environmental regulations apply to the activity of exploring for, and assessing the quantity and quality of, natural gas in shale formations in England. It directs the reader to existing Environment Agency advice and guidance and provides clarity on how pre-existing regulations and guidance apply to exploratory shale gas operations. (30 July 2013)

Environment Agency: An environmental risk assessment for shale gas exploratory operations in England: practical experience of shale gas exploration in the UK is limited and there are currently no Best Available Techniques (BAT) definitions. This Environmental Risk Assessment has been produced to help understand the key environmental risks and to underpin aspects of the Agency's technical guidance for onshore oil and gas operators. (30 July 2013)

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Smart Meters

DECC: Smart Meters: Modifications to the standard conditions of electricity and gas supply licences (No 1 of 2013): sets out the modifications to energy suppliers' standard licence conditions in order to implement the rollout of smart meters across Great Britain. (9 July 2013)

DECC: Smart metering implementation programme – Foundation Smart Market: The Government’s final response to the consultation on the Foundation Smart Market: sets out the Government’s final position on two aspects of the roll-out of smart meters: how meters installed in the Foundation stage will be enrolled and adopted into the enduring arrangements; and the regulations to support smart change of supplier outcomes for meters installed during Foundation. It also sets out the legal drafting related to these policies. (24 July 2013)

HC Energy and Climate Change Committee: Smart meter roll-out: this report examines the Govenrment's programme for the mass roll-out of smart meters, which is due to take place between 2015 and 2020, and which will see energy companies install approximately 53m smart meters in homes and small businesses. DECC estimates that the roll-out will cost around £12.1bn and deliver benefits of £18.8bn. The committee concludes that smart metering has the potential to bring wide benefits to consumers, energy suppliers and the UK's energy infrastructure; however, the roll-out must be managed carefully if all these benefits are to be achieved and costs are to be kept under control. Consumers must get accurate, real-time billing data from their smart meter as soon as possible after it is installed if they are to gain the savings projected by DECC. (26 July 2013)

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Wind Energy

DECC: Wind energy goes large: announces that consent has been granted for two large wind farms - Triton Knoll off the Lincolnshire and Norfolk coast and Pen y Cymoedd in South Wales. Triton Knoll Offshore Wind Farm Ltd has been granted permission to construct a 1,200MW wind farm with 288 turbines which is expected to generate over £3.6bn of investment in Lincolnshire and Norfolk and create around 1,130 jobs across the country. Vattenfall is investing £400m in 76 turbines in Pen y Cymoedd Wind Farm, with construction scheduled to start in 2014 and first power being generated for the National Grid in late 2016. Vattenfall will also invest £1.8m p.a. into community funds for the 25 year life of the wind farm. (11 July 2013)
See also the Triton Knoll Offshore Wind Farm Order 2013 (SI 2013/1734) that grants development consent for the offshore wind farm.

Institute for Public Policy Research: Pump up the volume – Bringing down costs and increasing jobs in the offshore wind sector: this paper looks at both the opportunities and the challenges facing the Government's vision for the role for offshore wind in the UK’s energy mix. it finds that developing a strong supply chain that includes all major aspects of the manufacturing and construction process is crucial to maximising the local value of the offshore wind sector, while achieving scale is crucial to bringing down the long-term costs of the energy it produces. However, both forms of investment are being hampered by a lack of clarity and certainty around the Government's long-term commitment to wind power as a key part of the energy mix. The report highlights six priority areas of action towards the overall objective of creating a 'virtuous circle' for the offshore wind sector in the UK, to promote growth, reduce costs and maximise the benefits in jobs, regional rebalancing and trade. (9 July 2013) 

EWEA: Deep water – The next step for offshore wind energy: this report discusses how deep water wind turbines could unlock the massive energy potential in Europe's Atlantic and Mediterranean seas and the deepest parts of the North Sea (water depths greater than 50m). It states that floating turbines in North Sea deep waters alone could power Europe four times over. However, for this to happen, a supportive legislative framework is needed based on a binding 2030 renewable energy target, and new offshore designs must be developed for deep water, backed by an industrial strategy for offshore wind including support for R&D. (25 July 2013)

DECC: Offshore wind industrial strategy – Business and Government action: this strategy, developed in partnership with the Offshore Wind Industry Council, sets out how Government and industry will work together to promote innovation, investment and economic growth in the UK offshore wind sector. It covers: providing market confidence; building a competitive supply chain; supporting innovation; finance; and building a highly skilled workforce. Announcements include:

  • £20m from the Regional Growth Fund for GROW: Offshore Wind, a new programme to support the UK supply chain to become more competitive by offering tailored support from specialists;
  • £46m funding over five years for the Offshore Renewable Energy Catapult Centre to join up innovation between industry, government and academia and help companies to bring new products to market;
  • a new Offshore Wind Investment Organisation to attract inward investment to the UK;
  • industry-led initiatives to share information with the supply chain about their procurement timelines and contracting decision points;
  • a proposal that would require developers of offshore wind farms above a certain size to produce a supply chain plan before they can apply for a Contract for Difference, setting out how the project and procurement approaches will encourage a wider, more diverse supply chain and support innovation and skills;
  • expansion of the scope of the DECC offshore wind manufacturing funding scheme to support port and coastal infrastructure development in assisted areas of England. Any grants offered will be conditional on sites securing manufacturing investment; and
  • the Green Investment Bank has an ambition to invest a significant proportion of its £3.8b capital in offshore wind, co-investing in projects with commercial parties.

(1 August 2013)

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