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 MATTHEW CLAYTON - Investment Manager - TRIODOS
RENEWABLES FUND
This month we interview Matthew Clayton, investment manager for
Triodos Renewables in Great Britain.
Triodos Renewables Fund is a UK initiative of the Triodos
Bank, which is headquartered in the Netherlands and probably Europe's best
known and most successful ethical bank financing social and environmental
initiatives. In 1986, following the
Chernobyl nuclear reactor disaster, the bank created Triodos Ventures to
pioneer the financing of the then risky development of wind energy
projects. In 1995, the bank opened its
British office in Bristol and launched The Wind Fund, which later evolved into
the Triodos Renewable Energy Fund and now trades as Triodos Renewables. Today it has 3,500 shareholders who seek
investment meant to support the fight against climate change and which
recognizes the long-term business potential of renewable energy. The fund's
current portfolio includes six investments in wind and hydro which save over
50,000 tons of CO2 emissions and produce clean renewable energy for the
equivalent of 12,500 homes. Notable
wind investments include: Caton Moor wind farm in Lancashire, one of the
earliest commercial wind farms in the UK; "Gulliver", the UK's largest wind
turbine, at Ness Point, an industrial site in Lowestoft, Suffolk; and the
Haverigg II wind farm in Cumbria, a joint venture of the fund and the Wind
Company.
WIND ENERGY NEWS: What first motivated you to start working in
the renewable energy field?
MATTHEW CLAYTON: My interest began during my education where
there always seemed to be friction between the environment and economy. I've always
strived for some way to bridge the divide between the two and renewable energy
seemed to be the place where that was occurring. I earlier worked for one of Britain's twelve
electricity companies following their privatization and from there engaged in
European electricity trading. After a
few years of that I wanted to do something more ethical in the energy field
with my experience and expertise. I helped
to establish a group which pioneered the early Kyoto protocol emissions trades. We structured and brokered carbon financing
transactions for sustainable energy projects in Central and Eastern Europe (CEE). I advised a bio-fuel project in Bulgaria,
switching from coal to biomass, the country's first joint implementation
project. I went on to do a number of
transactions in the field in Southern and Eastern Africa and elsewhere in CEE. I thought I was emitting a fair amount of
climate changing carbon in the course of traveling around the world and wanted
to do something UK based. That's how I
landed at Triodos Bank.
WIND ENERGY NEWS: What changes in this field do you most
notice looking back on your career?
MATTHEW CLAYTON: I'm pleased to say that during the last ten
years the viability of renewables has greatly improved. Global energy drivers and the climates
change drivers are proving the necessity and generating widespread acceptance
for commercial scale renewable energy.
The emergence of support mechanisms for renewable energy has been
paramount in its market development. In
Europe we've seen two types of market support strategies pursued. One type is the energy feed laws adopted in
Germany and Spain. They have been hugely
successful in terms of getting equipment manufactured and put into operation,
but arguably they have also been quite a burden on the economies where they are
used. The second approach is the UK
model, and perhaps the Dutch model to some extent, which rely upon tradable
mechanisms. In theory these market based
measures can achieve renewable targets in a more effective way and with a
lesser burden on the economy.
WIND ENERGY NEWS: What are your typical day-to-day management
responsibilities?
MATTHEW CLAYTON: My workload corresponds to the split in the
nature of the activities of Triodos Renewables. One part is management of the existing
portfolio of energy projects. We have
23.5 MW of renewable capacity in both hydro and wind assets in the UK. We're running plants, dealing with
electrical sales matters, responding to legal issues, and all the variety of
other day-to-day business operation matters typical to wind and hydro
facilities. The other portion of my time
is occupied with the development of new renewable energy sites. Triodos has a number of contractual vehicles
in place with project developers.
Getting these projects up and running involves several challenging
steps. Because Triodos Renewables is a
promoter for the development of the industry, as well as a commercial energy
provider, it gets involved in the upstream side of the development process and
tries to assist and facilitate more capacity being built. We do this in two ways. One is through joint ventures and contractual
arrangements to work with developers who might have a portfolio of projects but
don't necessarily have the ready capital to get them launched and running. We assist these developments to the point
where they can be commercial. The second
type is commercial schemes where the developer has the site, the land, and the
electrical demand, but not the know-how to enable and structure a renewable
project. Here we can help as well.
WIND ENERGY NEWS: What
does the name Triodos stand for?
MATTHEW CLAYTON: Triodos has Greek connotations. Trio being Greek for three. We are founded on the three principles of
people, profit and planet. We seek to
deliver environmentally and socially sound projects which are sustainable.
WIND ENERGY NEWS: What
keeps you up at night?
MATTHEW CLAYTON: At the moment the UK planning process is one
of the biggest complications for renewables.
You can invest a lot of money in what looks like a very feasible project
with ideal wind conditions and great grid connections. But planning can stand in the way. It is a process that can be managed but at
the end of the day is something of a lottery.
Another emerging issue is that the UK government has
recommended something called banding under which fewer Renewable Obligation
Certificates, or ROCs, will go to onshore wind farms and more for stimulus
purposes to emerging technologies such as wave or tidal power and near
commercial technologies like offshore wind.
When you generate renewable power like wind you are effectively
producing two products, electricity and the ROCs. Both these products have market value,
separately or together. The proposed
change is both an opportunity and risk for us.
We are concerned for our development portfolio which is at risk of
having its support diluted. The current
system of one ROC per MWH generated is a significant component for the ongoing
sustainability for our existing wind facilities and those we are planning. But we do understand and back the need for
other green electricity technologies to be encouraged and supported so that
they will grow and develop faster in the future. Our concern is that the banding proposal will
undermine the proven successful efforts of building up onshore wind that we and
others have undertaken. Also, the
banding moves away from market based principles by imposing bias towards
specific technologies.
WIND ENERGY NEWS: What is the scale of the fund's ambitions?
MATTHEW CLAYTON: Currently we have an asset base
approaching £ 35 million. We are hoping
to increase that to £100 million within
the next two years.
WIND ENERGY NEWS: Both Triodos Bank and Triodos Renewables run
under the principles of people, planet and profit. Do you think that makes the pursuit of
profits easier, more difficult or more complex to finance and operate renewable
energy?
MATTHEW CLAYTON: It narrows our market but it also
focuses it. Because we seek to invest in
socially and environmentally beneficial and sustainable business activities, we end up collaborating with entrepreneurs who
are that much more passionate about their commercial ventures. As a
result, levels of business failure and default rates are lower than the typical
High Street organization.
WIND ENERGY NEWS: What
should public institutions, national and international, be doing to assist and
encourage renewable energy investment ventures like Triodos?
MATTHEW CLAYTON: The
key for any successful project in terms of finance is going to be
certainty. Everyone can accept degrees
of price uncertainty. But what is very
difficult to operate under is institutional uncertainty. I think consistency from the governmental
institutions within the markets in which we operate is crucial for a more
successful investment climate for renewable energy technologies.
WIND ENERGY NEWS: What is
the realistic potential of wind to cover Europe's energy needs?
MATTHEW CLAYTON: For wind the grid can handle
upwards of twenty percent until there are any real stability issues. We're a long way from that. We're probably at 3 or 4 percent.
WIND ENERGY NEWS: How
about the potential for wind in the developing world?
MATTHEW CLAYTON: Most of our truly international
opportunities are managed out of the bank in the Netherlands. So I am not presently involved in them. But there are good opportunities for
bio-fuels and hydro on the weak grid or off grid applications typically
experienced in Southern and Eastern Africa.
Wind is not helpful where the grid does not extend out, as is the case
in remote or fragmented grid situations.
However, where there is a grid, a wind project can deliver low cost
energy to the system. In that case, wind
can be beneficial in the developing world because it is not hampered by
exposure to crushing prices or exchange rates that commonly afflict the
consumption of imported fossil fuel energy in these countries.
WIND ENERGY NEWS: How
have you created a link between ordinary investors and the projects in which
you invest?
MATTHEW CLAYTON: Such a relationship is basically
the principle on which Triodos Renewables was founded. We've seen that customers want to be
intimately involved with projects and the fund provides them with a vehicle
that allows their direct investment in the nuts and bolts and development of
renewable energy capacity. We have
3,500 shareholders. In the last capital
raising in 2005 they had the opportunity to make a minimum investment that was
presentable in the proportion of a wind turbine they were effectively buying,
the units of renewable electricity to be generated, and the impact they were
going to make on the UK grid.
The fund's investment approach differs from another model
common in the UK, where a community invests in a particular wind generating
project in their own backyard. We think
the fund model is advantageous because it offers investors the protection which
comes from a diverse portfolio of projects rather than concentrating risk and
reward in only one.
WIND ENERGY NEWS: Some communities
and places in the UK and Europe are reticent, even antagonistic, toward wind
energy. Is this the NIMBY syndrome or is
the resistance understandable? And can it be changed?
MATTHEW CLAYTON: Nimbyism and related planning
issues is probably the single greatest obstacle at the moment. With current levels of grid penetration for
renewable capacity the technical problem of grid stability is a long way off of
being an issue. So resistance to wind
energy largely boils down to a number of local fears. One is that the entire landscape is going to
be blanketed with forests of wind farms.
Second is that the economics of wind energy are marginal and a burden to
the economy. And there are environmental
concerns, like noise and shadow flicker that are typically claimed by anti-wind
lobbies. But in reality, all these
concerns can be readily and simply managed.
WIND ENERGY NEWS: Some
have said that "wind power is the template for other renewables." What is needed to make socially responsible
investment in eco-innovation for energy take off in Europe? And what are the key factors for success?
MATTHEW CLAYTON: The proper market conditions are
essential at the very least. Support
mechanisms must also be created. The
bones of the support are there. Beyond
that is having manufacturers who are willing and able to offer technological
advancements and innovations. It is
always difficult to get robust investment in new technology of any sort. If there were warranties put in place by
manufacturers of new energy technologies, that would substantially encourage
financial investment.
WIND ENERGY NEWS: Do you
consider wind a permanent solution or a bridge or component toward a larger
solution?
MATTHEW CLAYTON: Wind is not a 100 percent
solution. In the UK or any other country.
No country could survive on wind alone.
But I do see wind energy as a significant part in the diversified portfolio
approach to electrical needs on a national and continental scale.
WIND ENERGY NEWS: How do
you visualize Triodos and its role 5 and 10 years down the road?
MATTHEW CLAYTON: In the short term we are looking
at proving that the existing technology can work, stimulating the market,
getting more capacity on the ground, and providing our shareholders access to
renewable technology and the energy produced by that capacity. In the longer term, we hope to support the
commercialization of new renewable energy technologies in the same way we
supported the early beginnings of wind.
We are particularly interested at the moment in tidal and off shore wind
and early stage involvement in them so that we can assist that whole sector in
its growth and development to a commercial scale.
WIND ENERGY NEWS: Does
Triodos have any interest in investment in wind ventures in North America?
MATTHEW CLAYTON: Funny, you should say that. I think the right answer is that if and
where there is an opportunity, we would be interested in examining it.
Contact Information for Matthew Clayton & Triodos
Renewables Fund
Email:
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Phone: 0117 980 9765
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