Clean Energy Infrastructure a Good Match for Pension Funds

Investments in European renewable energy infrastructure are a good choice for pension funds and insurance companies because they provide a good match with their liability profiles, said Joost Bergsma, CEO of BNP Paribas Clean Energy Partners.

Speaking at Environmental Finance's Investing in Renewable Energy Infrastructure conference in London on 9 July, he noted that the EU's goal of generating 20% of its energy from renewable sources by 2020 provides a background of strong demand. Furthermore, in many member states, progress towards this goal is being driven by policies that are attractive to long-term investors.

These include: feed-in tariffs that guarantee a premium price per kWh; priority on the transmission grid for clean energy; inflation-protected revenues; and strong cashflows. The sustainability features of these projects is not a major driver for most investors but rather an added benefit, he noted.

The fact that feed-in tariffs may be reduced over time, is not necessarily a problem as, in most jurisdictions, once a project has been granted a particular tariff, it is locked in and new tariffs apply only to new projects. For example, he said recent reductions of around 15% in feed-in tariffs for solar power projects in Germany and up to 18% in Italy were "appropriate" given that the cost of producing solar cells has fallen significantly. "It's healthy that subsidies are coming down," he said.

The more dramatic changes proposed in Spain which may affect some existing projects, not just new ones, are a special case, he said. In most countries with feed-in tariffs, the premium price is passed on to electricity consumers, but in Spain the extra cost is born by the state.

By. Graham Cooper

Source: Environmental Finance