Investors ‘holding off’ until government confirms LCF beyond 2020

A panel of investors and financiers of the renewables sector have called for greater transparency and clarity regarding the Levy Control Framework (LCF) and its future after 2020.

As part of its inquiry into how recent policy has impacted investor confidence in the UK, the energy and climate change select committee welcomed a range of figures related to the financing of renewable technologies.

Alejandro Ciruelos from Santander’s energy finance division said the LCF had so far proved to be a “helpful policy” by providing a total spend on low carbon technologies to investors. However, he added that questions surrounding the projected overspend by 2020/21 are causing investors to hold off until the future of the fund can be confirmed.

He added that a possible extension of the existing ‘headroom’ under the LCF is “the most important policy for us.”

This view was backed up by Peter Dickson, founding partner and technical director of Glennmont Partners, who said: “Understanding what is going to occur after 2020 is the most significant thing now. Our concern at the moment is that there is no specific target that goes beyond 2020.”

Chris Hullatt, chief financial officer and co-founder of Octopus Investments, further supported this view and claimed the LCF, and more importantly how it is calculated, should be made more apparent so that the investor community is given more “consistency and clarity” for the future.

The panel added that yearly updates on the LCF should be made available to investors in the period after 2020/21 to provide a clearer picture of the UK sector.

The LCF has come under huge scrutiny since a projected overspend caused the early closure of the Renewables Obligation scheme for sub-5MW solar projects, as well as cuts to subsidies paid through the feed-in tariff.

DECC, which is currently engaged in a court case over the closure of the RO, has been called on repeatedly to provide greater levels of transparency around the LCF but has yet to do so. The department has refused to answer freedom of information requests from the Solar Trade Association – branding the request “manifestly unreasonable” – while the National Audit Office (NAO) has confirmed that a review of the LCF is currently underway.

The ECC select committee has also called for more information on the LCF, with committee member Matthew Pennycook saying its today’s session: “I think we all agree that the LCF isn’t as transparent as it should be.”