United Kingdom

United Kingdom

Vote of financial confidence

A British study benchmarking renewable energy against other forms of investment reveals "that the wind sector in particular is well placed to attract investment funds," as long as the NFFO mechanism is in place, according to author Jonathan Johns of accountants Ernst & Young's. The study plots percentage returns against investment risk for renewables and for a series of comparable conventional investments as well as for a broader range of investments popular with the general public.

"Large wind" does well, giving returns higher than a number of benchmark investments, such as government gilts, National Savings Investments, Combined Cycle Gas Turbines (CCGT), Scottish Hydro and CalEnergy. At the same time, the risk associated with large wind is only marginally greater than CCGT, small hydro and Building Society shares -- and the return is only slightly less than Building Society Shares.

Of the renewables, only landfill gas gives a higher return for less risk. Biomass gives the greatest return, on a par with large hydro, but is the riskiest investment of all. Small wind is not a good investment option, giving the lowest returns of all -- marginally less than National Savings Certificates -- but bearing a risk only surpassed by biomass and municipal waste combustion.

A package of renewables, however, gives an average equity return under the study's parameters of 16.4%, which clever financing and tax planning could well improve. Johns points out that this compares well with the 15-20% return expected in private finance initiatives. "Renewables projects merit serious consideration by corporate investors," concludes Johns.

"To sum up, it may be two to three years before quoted renewable energy companies are to be found coming into the market place; however, the prospect of that happening now clearly exists," he adds. Johns' conclusions were published in NewReview, a quarterly newsletter published by the Energy Technology Support Unit, an organisation contracted to the British government.

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