Money Matters on Our Way to a Greener Future: Biogas Plants’ Financing with Export Credits
| Published date | 01 September 2015 |
| Author | Kim Richter,Ole Lindhardt,Jan Vassard |
| DOI | http://doi.org/10.1111/1758-5899.12262 |
| Date | 01 September 2015 |
Money Matters on Our Way to a Greener
Future: Biogas Plants’Financing with Export
Credits
Jan Vassard, Kim Richter and Ole Lindhardt
EKF, Denmark
Climate friendly technologies are in high demand across
the globe. It can certainly be debated whether the transi-
tion from fossil fuels to renewable alternatives is happen-
ing fast enough to effectively prevent global warming,
and much depends on the United Nations Climate
Change Conference (COP 21) to be held in Paris in
December 2015. But the fact that new, green technolo-
gies are very much en vogue these days is not in doubt.
Making sure that supply meets demand can be an
entirely different matter, however. Many new, climate
friendly technologies still struggle to achieve commercial
breakthrough and universal reach. As will be explored
below, a lack of access to the necessary financing is
often a significant obstacle. In fact, the total amount of
global climate finance has decreased for two consecutive
years in 2012 and 2013, and ‘the cumulative gap
between the level of finance needed and finance actually
delivered is growing’(Buchner et al., 2014, p. 5).
Driven by public policy
Energy technology, including renewables such as wind-
mills, is a stronghold for Danish companies (Tornbjerg,
2015). In fact, no other European country matches the 11
per cent share that energy technologies have of Den-
mark’s total goods exports. Italy is second with a 9 per
cent share. In 2013, total Danish energy technology
exports (see Figure 1) reached DKK 68 billion (€9 billion),
more than half of which was green energy including
renewable energy solutions and energy efficiency tech-
nologies (Confederation of Danish Industry, 2013).
Danish energy technology exports
EKF is Denmark’s export credit agency: a state-owned
financial institution with a mandate to help Danish com-
panies finance their export business. This gives EKF a
unique insight into the current financing conditions for
renewable energy solutions, which feature heavily on
EKF’s books. Wind turbines are dominant, accounting for
almost 60 per cent of EKF’s total portfolio of €7.5 billion
(EKF, 2014a), but other technologies including solar
power, biomass and biogas, and a range of energy effi-
ciency solutions play a part, too. This makes EKF the
world’s leading export credit agency in terms of financ-
ing for green technologies, according to the OECD.
A common theme for the green technologies is that
demand for them is driven first and foremost by public
policy. Green business models are highly dependent on
various types of public subsidies, such as tax incentives,
long-term, guaranteed minimum prices called feed-in tar-
iffs, and tradable carbon credits or Green Certificates. It is
not unusual to see projects where up to 40 or 50 per
cent of total revenue is generated by one or more types
of subsidies. As discussed by Buchner et al. (2014, p. 19)
‘domestic policy frameworks are critical drivers of invest-
ment’.
The market, in other words, is where the public money
is. A good example of this is biomass plants, where the
UK is currently the market. As part of the UK Renewable
energy roadmap, a market window for biomass plants
has opened in the UK and will shut firmly again when all
the public funds allocated for the programme are spent,
most likely at some point during 2015 (see, e.g. Depart-
ment of Energy & Climate Change, 2013). This has led to
aflurry of activity recently. Accordingly, EKF has so far
guaranteed loans worth more than €300 million for the
construction of four new biomass plants in the UK in
2014 and 2015. Three of these will be constructed with
technology from the Danish company BWSC while the
fourth is the work of Babcock and Wilcox Vølund,
another Danish company.
Finding the financing
Public money is necessary, but not necessarily sufficient.
Even when the subsidies are available, green energy
technologies may still face an uphill struggle. In order to
qualify for the public subsidies mentioned above, the
solar parks, wind farms and other green sources of
renewable energy must normally be operational. In
other words, they must be built first –and that requires
Global Policy (2015) 6:3 doi: 10.1111/1758-5899.12262 ©2015 University of Durham and John Wiley & Sons, Ltd.
Global Policy Volume 6 . Issue 3 . September 2015 315
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