Breaking up the Green Investment Bank will free it from political whims

Really, though, Mr Cable is just a flag bearer. The GIB’s privatisation has served as a kind of rallying point for a coalition of politicians and campaigners who, in their hearts, really don’t like the private sector and think profit is a dirty word. If the environment is to be saved, in their view, it must only be saved by government. And so they are waging a pointless and muddled campaign against the bank’s sale.

For one thing, their starting assumption is wrong.

The GIB is quite unlikely to be broken up. It currently has investments in 85 projects and has exited three others, which is not bad going for an operation that began five years ago and most of its investments – 61 of them – are less than three years old. So it would be a tall order for whoever buys the bank – widely believed to be Macquarie – to flog them all off quickly. More importantly, given that the Government is presumably selling the bank at a premium to the current cost of its assets, it’s really not clear why Macquarie would bother to pay up for the business if it just wanted to sell everything it owns and fire the staff.

So far, the evidence of the GIB’s impending doom amounts to some research by Greenpeace showing that it has been setting up new corporate entities to house its various assets.

Well, so what? These registrations could be corporate housekeeping, tax efficiency measures or, yes, readying assets for sale, which is an entirely unremarkable activity for a private equity firm that has owned some of its assets for four or five years.

Let’s assume though, for the sake of argument, that Mr Cable is right and the bank is to be broken up. This, he declares, would be “tragic”. As tragedies go – if this is one, which it’s not – it’s not much of a tear-jerker.

The GIB was created in order to address what Mr Cable identified as a market failure.

In 2010, the renewable energy sector was teaming with new technologies, but investors were nervous about funding them. The GIB’s role was to back very early stage technologies, which the UK is notoriously bad at financing compared to the US, and co-invest with private players in order to speed up the creation of a new market in green assets. Whether it’s because of the bank or not, the UK’s green energy sector is now big and growing. Figures compiled by Bloomberg New Energy Finance show that annual investment in UK renewables was £15.2bn in 2015, more than was invested in Britain’s oil and gas industry in the same year.

Official data shows there are 96,500 low-carbon energy businesses in the UK generating revenues of nearly £50bn a year. Electricity generation shot up from about 25,000 gigawatt hours in 2010 to more than 80,000 in 2015, according to PwC. Every weird and wonderful kind of technology, from anaerobic digestion to geothermal, has grown in scale. What, then, is the point of a publicly owned Green Investment Bank?

If there is a problem with the UK’s renewable energy market, it is caused not by the market, but by the Government, which keeps chopping and changing subsidy regimes.

Investors are constantly flummoxed by unexpected changes in policy. The Government solicited proposals for a new carbon capture and storage technology, offering a £1bn prize, and after investors had spent a fortune developing ideas, then dropped the whole thing. A new auction of contracts for difference, meant to take place last year, still hasn’t happened. The renewable heat incentive scheme has been delayed repeatedly.

Alon Laniado, a partner at Eternity Capital, which has investments in UK renewable energy, said: “It shows the nervousness this country has, the love-hate relationship it has with green energy. There is loads of money available to invest.”

Whatever views the Tories hold about renewable energy, this is no way to create an effective investment environment and it wastes time and money for both taxpayers and investors.

Instead of awarding massive subsidies for decades and then slashing them when the political cost gets too high, the Government should develop a new subsidy regime, says Adrian Judge, a renewable energy consultant at Tolvik Consulting and a former employee of the GIB. This could involve withdrawing subsidies at a predictable rate depending on how the cost of a technology falls, with both bill-payers and investors sharing the benefits.

Crusaders focused on the GIB’s sale are barking up the wrong tree. They should be delighted that the bank can be successfully privatised, because the more self-sufficient green energy is, the more insulated it will be from the political whims of government – and the better it will serve the economy.

Instead, Green MP Caroline Lucas and Labour’s shadow business secretary Clive Lewis are raging about the evil private sector getting its hands on viable low-carbon assets.

As Mr Lewis revealingly declared during the House of Commons debate on the GIB this week, Labour’s guiding philosophy is: “Public good, private bad.” With friends like that “supporting” the renewables sector, who needs enemies?