While Scotland’s onshore wind capacity needs to double every year for the next few years, we need to treble offshore wind investment, says Jimmy Williamson, a Director of Net Zero Investment at the Scottish National Investment Bank. Net zero finance faces fierce competition for global capital.
The national investment bank is a relatively newcomer on the investment scene but is already making its mark.
“We are about a third of the way into our journey as a development bank. We have been seeded with £2bn of capital for ten years, we’ve got a third of the way through that journey investing £785m so far across 41 investments and projects,” he told The Business seminar on infrastructure.
“We’re most proud that we’ve crowded in a further £1.4bn of additional capital from elsewhere.”
THE BANK IS HELPING DERISK CAPITAL
“Our target is one to one. We don’t always achieve that on a deal-by-deal basis. We’ve developed a very flexible approach where we might invest and seed a business now, allowing it to derisk or transition its business model, and that at some point in its future, it is more financeable and more attractive to third party investors. There is a time delay in our ability to crowd capital in from other sources.”
With the requirement to rebase the industrial energy landscape, Mr Williamson is involved with energy transition and the move to net zero infrastructure with net zero finance.
“There is a need to compete for global capital. One bank theme which we narrate to co-investors or third-party funders is that we don’t just invest in stuff in Scotland because we like it, and we can. We look to invest in businesses and projects where there are opportunities with some form of intrinsic, technical competitive or sector advantage.”
Mr Williamson says there is a close correlations between transition to net zero and place-based infrastructure as we start to re-industrialise parts of the country. Another major theme is to be innovation-based which is about scaling companies and making them more productive.
“We believe that Scotland – and the UK more broadly — is facing into a transformational phase of infrastructure development and it is necessary. This is long dated for between 15 to 20 years and not a short-term opportunity,” he told the audience.
The banker, who spent much of his career on energy projects within mainstream banking, says that onshore wind capacity needs to double every year for the next few years, while we need to treble offshore wind investment.
The UK needs to invest between £30bn to £40bn in grid infrastructure, while the average cost of an offshore wind project is £1bn to £1.5bn per GW of energy output. The UK is at 10GW and needs to reach 40GW.
“These are huge numbers. When I come to the point of competitive advantage, the UK is already the leading market for offshore wind, after China. That’s in terms of installed capacity, projects in the pipeline and the commitment to build out more. Most of that in Scotland is import led.”
Scotland accounts for 10 per cent globally of offshore floating wind projects. He spoke about the complex supply chains of financing with net zero finance and building wind projects, with the investment needed in Scottish ports, and former oil fabrication yards in the North-East of Scotland being repurposed for potential work.
“The over-riding challenge is we need to invest in Scotland’s infrastructure now yet there will be a delay before offshore construction work arrives in some place. We cannot be sure who we are going to serve in the market place. It’s still uncertain but we need to be ready in time to ensure the end developments in offshore wind happen.”
