EV: The next funding opportunity?
On 2 January 2018, the European Commission announced it was looking at plans suggested by MEPs to ease capital charges on banks' green investments.
This could have a significant impact on the funding landscape for clean energy in the UK, as it could lead to increased investment in new technologies such as electric vehicles, their associated infrastructure and projects that combine electric vehicle charging points with other technologies such as solar and energy storage.
The end of subsidies has heralded a pause in new developments of solar and onshore wind projects for the time being. While we may see further investment in operational projects as they seek to maximise revenue and value through adding energy storage and associated lease extensions, the funding opportunity has undoubtedly changed.
While we are likely to see an increase in debt funding of energy storage projects over the next twelve months as funders become more comfortable with the bankability of these projects, the market is now looking at what the future holds beyond that.
At the end of 2017, electric vehicles became the new watch word as the UK government's Budget, Clean Growth Strategy and Industrial Strategy all held provisions to ensure that electric vehicles and their associated infrastructure play a role in ensuring the UK's carbon neutral future. But does this present an opportunity for funders?
Like with so many technologies, it may be that initial investment in electric vehicles is an equity play as equity investors can get comfortable with the high risk profiles associated with investing in relatively untested technologies. However, the more traditional funders are looking at electric vehicles as a potential future investment and the roll-out of black cabs in London in January has already sparked some interest.
Electric vehicle charging points and their associated infrastructure, as standalone investments, are also likely to receive increased interest over the coming months. While there are question marks around the project structure and what constitutes a bankable model, it is only a matter of time before the first of these projects come to market, be that on an equity funded, equity/debt mix or even a pure debt-funded basis. It is simply a case of finding the right developer with the right project.
Increasing interest is also being given to the combination of electric vehicle charging points with 'solar + storage' where a large energy user employs on-site staff at their office, distribution centre, warehouse, manufacturing plant and so on. This could be in the public or private sector. In this case, not only does the solar + storage solution allow the end-user to manage their energy use and potentially benefit from additional revenue streams, but the addition of electric vehicle charging points benefits their staff. Furthermore, if there is widespread adoption of smart "vehicle to grid" technologies that allow parked electric vehicles to be used on an aggregated basis in much the same way as separate batteries this could increase the scope for securing additional revenue. However, the modelling for this is still in its infancy.
While 2018 is likely to see another change in the direction that green investment takes, there are considerable opportunities out there as new markets develop around energy storage, electric vehicles and other technologies such as biomass and tidal energy. Investor interest in this area remains high, and it would seem that any measures that help to increase the amount of green investment can only be viewed in a positive light.
This publication is intended for general guidance and represents our understanding of the relevant law and practice as at February 2018. Specific advice should be sought for specific cases. For more information see our terms & conditions.