New Opportunities Announced for Energy Sector Investment

    View Authors December 2012

    The UK Government has recently announced the Energy from Growth initiative, intended to boost the UK energy industry.

    The initiative anticipates The Government Procurement Service (GPS) – the UK’s largest energy customer – buying energy to be used by the public sector from non-intermittent renewable power supplies, such as biomass and energy from waste. Contracts, available for up to 25 years, will be offered to renewable energy generators for a specific proportion of their capacity.

    This initiative can offer a number of benefits including:

    • Guaranteed business to help to attract investors
    • Providing much-needed security to assist financing for stalled projects
    • Freeing-up finances to be used in the local economy
    • Providing new opportunities in the market
    • Creating private sector jobs in the energy and construction industries
    • Generating demand and work in the supply chain from land use, construction materials, plant and machinery, operation management and raw materials for processing.

    A pilot scheme for the initiative will run in the New Year and intends to diversify 2% of GPS’ demand, worth approximately £25 million a year. If successful, GPS will diversify up to half of its energy portfolio, which is currently worth £750 million.

    The proposal is a positive stride with the potential to increase renewable energy generation and improve energy security for the UK. However, there are issues that the Energy for Growth initiative raises.  It remains to be seen how the contractual arrangements between the Government and energy suppliers will operate. There are also legal and practical matters to address such as securing planning permission for new energy projects to accommodate new demand, how funding arrangements will be structured and certainty over materials for processing.

    Squire Sanders has relevant experience of assisting clients with proposals in this sector. This means we are in a position to navigate clients through the potential options and avoid pitfalls that this new initiative will bring.

    For more information relating to this announcement or how your business may be able to benefit from this new opportunity, please contact Richard Glover.