Category 18 April 2019

Greater Manchester Low Carbon Investment Pipeline

In order to deliver better Low Carbon investments in Manchester, a pipeline fund was created, allowing the City to channel investment towards projects with high potential and strategic value. The City gained technical expertise and guidance by establishing a partnership with the UK Green Investment Bank. Together they were able to optimise the use of resources, ensure financing for small projects and avoid duplication of effort in the region. 

The challenge:

Greater Manchester, United Kingdom, has set an ambitious CO2 emission reduction target of 48% by 2020, as part of its Low-Carbon Economic Area (LCEA) plan. This will require significant investment in sustainable and renewable energy projects. However, without coordination it was feared that projects may duplicate efforts, or investors would finance projects with sub optimal carbon reduction potential.

Furthermore, small-scale projects often struggle to attract investment, as they generate low returns. However the cumulative impact of many small projects on carbon emissions can be significant. A way was therefore needed to ensure smaller projects also received funding.

The measure:

The LCEA programme board recognised that a common approach to investment was needed. Over a 5 year period, a Low Carbon Investment Pipeline was created, to coordinate investment activity in Manchester. The idea was to pool investments by setting up synergies for promoting market intelligence and promoting information sharing.

A joint venture was established to facilitate this, with the UK Green Investment Bank, an initiative of the UK Government, providing support to the City of Manchester.

In the first phase of the joint venture, a series of workshops and collaborative meetings were initiated, promoting information sharing and the exchange of experiences. The partners identified three priority workstream areas: street lighting, heat networks and Non Domestic Energy Efficiency. After rating potential projects, eighty were selected, with twenty of these being given priority to benefit from more advanced coaching.

The second phase oversaw a detailed task and cost planning of the selected projects, before funding was sought from industry and investors.

The private sector was then invited to invest in an Investment Fund, rather than individual projects. This arrangement meant that the Investment pipeline managers were able to channel funds exclusively into the high priority projects identified in phase one.

During only its second year, it was decided that a formal joint venture was no longer necessary, as the aims of the pipeline could be met without such a partnership. At this stage a £100 million portfolio of feasible projects had already been identified. The support from the Green Investment Bank had provided the City with the capabilities to move forward with the investment pipeline alone.

Lessons learnt: 

The pipeline shows the value of collaboration. Through the joint venture, the Green Investment Bank provided access to technical expertise, national political influence and best practices which were not readily available to the City internally. This technical knowhow was particularly important, enabling the assessment and optimisation of each project individually to maximise the carbon reduction benefits.

The policy also displayed how such cumulative funds can ensure funding for small or high risk projects, supporting technology adopters, which may otherwise not attract investment.

Further deployment:

The practice itself has good potential for transfer, but is reliant on the existence and capabilities of specialised institutions, such as the UK Green Investment Bank. The pipeline is therefore estimated to be GML 7.