RENEWABLE energy is in the midst of a “turnaround”, according to Trillion Fund’s chief executive, which could benefit the peer-to-peer lending sector.
Theresa Burton heads up the wound-down green energy P2P platform, which closed to new investment in 2015 after government subsidies for the sector were cut.
She told Peer2Peer Finance News that new opportunities are emerging for green P2P funds, as the first subsidy-free projects begin to launch, raising the possibility of new loan streams for alternative lenders.
“I think we’re starting to see a turnaround,” said Burton. “But the last three years have been a difficult transition for the industry with regards to wind and solar power.”
Trillion Fund is not the only P2P lender to suffer after renewable energy subsidies were cut. Earlier this year, Assetz Capital shuttered its Green Energy Account due to a lack of deal flow.
“We pulled out of the market in September 2015 because we saw immediately how drastic these cuts and tariffs were on the industry,” said Burton. “We knew that institutional capital has a huge appetite for renewable energy so if a developer had a new project they would be funded by an institution quickly, so why would they go to a P2P lender?
“The sector was hit hard, but it’s now turning around and recovering, and we will start to see more projects coming online in wind and solar, for both construction and operational projects.”
Construction projects cover renewable energy farms which are still in the development stage and require funds before any work can begin. This makes them a riskier option, as there is a chance that the project may never get off the ground, or that issues will emerge during the building phase. Operational loans are offered to projects which have already been built but require financing for expansion or debt management.
Prior to 2015, many renewable energy providers were able to get their start with the help of government subsidies. These subsidies acted as a guarantee, ensuring that P2P lenders did not have to take the risk of financing the entire project. However, once the subsidies were cut, many green projects foundered.
“We had lot of phone calls and helpdesk calls when we quit the sector,” said Burton. “One of our wind turbine manufacturers went bankrupt.”
However, in September 2017, the UK’s first subsidy-free solar farm was opened in Bedfordshire, which “shows that the sector is evolving”, said Burton. She added that the government subsidies are likely to be a good thing for the industry in the long run but criticised the timing and impact of the cuts.
“It’s right in the long term that renewable energy stands on its own feet,” said Burton. “But the cuts were too hard and too fast. It didn’t give the sector time to adjust to the economics. Deal flow was hit and the entire sector was hit and so there were less projects in the pipeline for wind and solar.
“There would have been more than enough pipelines for everyone in the summer of 2015 if the government hadn’t changed the subsidy so radically.”
Earlier this year, Trillion Fund paid off its final loan, meaning that every one of its investors was able to reclaim their capital with interest. The platform is now looking for buyers for its technology.