Utility Week

14 | MAY 2021 | UTILITY WEEK Countdown to COP Analysis The NIB must aim forthe stars David Blackman looks at plans for a National Infrastructure Bank. What type of projects is it likely to support and what lessons can be learnt from the history of its short-lived predecessor, the Green Investment Bank? I n the world of start-up business, they call it the Valley of Death. This describes the ordeal involved in turning a research and development operation (requiring perhaps substantial, but limited, investment) into a commercial proposition that can swallow hundreds of millions, or even billions, of pounds. "With all nascent technologies there is a Valley of Death, which is where you reach a point where you have to take a jump and if you make it over you are • ne. A lot of that comes down to access to capital," says Dr Jonathan Marshall, head of analysis at the Energy and Climate Intelligence Unit. This is a particular challenge for green technology companies. Unlike most start-up • rms, they don't just have impatient inves- tors breathing down their neck. The rest of us have a stake in their success, given that the testbed technologies these companies are working on o‡ er routes to eliminate the potentially catastrophic rise in global green- house gas emissions. Bridging this valley looks set to be one of the key roles of the National Infrastruc- ture Bank (NIB), which goes live this spring in Leeds, chancellor of the exchequer Rishi Sunak revealed in March's Budget. If the NIB has a familiar ring to it, that's because it shares a lot of the hallmarks of the Green Investment Bank (GIB). Set up by the then coalition government in 2013, the GIB was controversially sold o‡ to Australian investment bank Macquarie a– er the Con- servatives regained sole power at the 2015 general election. The National Infrastructure Commission (NIC) set the ball rolling on the new initiative in 2018 when it called for the establishment of an NIB. So, what should the role of the new bank be and what lessons can be learnt from the history of its short-lived predecessor? Laying the foundations The government will supply the new institu- tion with £12 billion-worth of initial capital, which ministers hope will draw in a total of £40 billion-worth of investment. Some critics, including the Labour opposition, have branded the scale of the government's commitment to the GIB as inadequate. The naysayers include Tom Burke, founder and chair of environmental consul- tancy E3G, which contributed to the estab- lishment by then business secretary of state Sir Vince Cable of the GIB. "The govern- ment can commit £27 billion to roads we don't need and only £12 billion to a national infrastructure bank that could make an enor- mous di‡ erence to levelling up and net zero by lowering the price of capital in the right ways," he says, adding that an assessment of the UK's infrastructure funding needs points to a leveraged total closer to £150 billion. Nick Molho, executive director of the Aldersgate Group of investors, agrees that the level of capital committed by the govern- ment is on the low side, compared with its nearest equivalent, the German KfW bank. "It has a much higher magnitude of • re- power compared to what we are setting up," he says. NIC chief executive James Heath isn't worried about the scale of the government's commitment. He says: "The bank is clearly not there to • ll all the capital requirements for the transition to net zero. It can make an important contribution but it's designed to leverage private capital for market failures and deliver additionality." This last point addresses a criticism of the GIB that it invested in projects that would have found backing anyway, crowding out other sources of capital. Marshall says: "It's not about the money. It's about how targeted it is: the GIB o– en spent money on things it didn't really need£to." Richard Howard, head of research at Aurora Energy, points out that many private investors have an appetite for low-carbon infrastructure these days. "Private sector funders are now funding large amounts of clean infrastructure anyway, " he says. "The government has to be careful not to crowd out what would have happened anyway in the private sector, which wouldn't be particu- larly helpful. "If the NIB goes around funding things lots of others would have otherwise, you wonder what the point is." Utilities can tap a large amount of the pri-

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