Getting the investment-risk balance right

Nations with the most attractive subsidy and policy frameworks for low-carbon assets will have the greatest success attracting investment, write Ingrid Holmes and Tony White, senior associate and senior adviser, Climate Change Capital

LOW-CARBON power-generation assets are expensive. For a UK offshore wind farm, for example, capital spending is likely to amount to £1bn ($1.5bn) or more per gigawatt of capacity. Such projects cannot be undertaken without state subsidies and a policy framework that delivers a deal pipeline. In addition, financing is scarce: whereas at the height of the debt boom perhaps one or two banks might have taken on the financing risk associated with such projects, the shortage of capital is creating a greater need for a project-finance approach to funding construction. In turn, this requires a syndicated approach to financing projects – just at a time when trust between banks is low. In addition, th