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Pension fund invests £10m in community energy

A renewable energy developer focusing on community-scale projects is approaching its £100 million funding goal after the Greater Manchester Pension Fund invested £10 million in the scheme.

A renewable energy developer focusing on community-scale projects is approaching its £100 million funding goal after the Greater Manchester Pension Fund (GMPF) invested £10 million in the scheme.

The developer, Albion Community Power (ACP), is one of the largest single sources of equity funding for community energy in the UK and has already attracted investments of £50 million and £10 million respectively from the Green Investment Bank (GIB) and the Strathclyde Pension Fund in Scotland. 

The latest investment, announced by GMPF on 10 August, takes total investment in the scheme to £70 million, nearly three quarters of the way to its £100 million target.

Community-scale energy

ACP plans to use the funding pot to develop a number of community-scale renewable energy projects across the UK that are closer to sources of demand and will therefore cut transmission and distribution losses in the electricity grid and reduce carbon emissions.

Its latest investment is a £3.3 million hydro-electric project on the River Arkaig in the Scottish Highlands, which is expected to generate 2.3GWh of electricity every year when complete in February 2016 – enough to power 550 homes. 

‘Growing appetite’

Chair of Strathclyde Pension Fund, Councillor Paul Rooney, said: “There is clearly a strong and growing appetite among forward-thinking pension funds to diversify their portfolios into this exciting sector.

“Manchester is one of those funds, so it is no surprise to be working with them and the GIB to provide funding for innovative, community-focused infrastructure.”

Divestment

The announcement comes amid increasing pressure on institutional investors to divest away from fossil fuels to avoid the perceived risk of a so-called ‘carbon bubble’ of stranded assets as fossil fuel sources become ‘unburnable’ due to tightening restrictions on carbon emissions. 

Recent research has also tackled the lingering perception that investments in sustainability are riskier than traditional investments after finding that some fossil fuel-free stocks have been outperforming their peers. 

Councillor Kieran Quinn, chair of GMPF, said that investment in schemes like ACP would play a key role “as the pressure to diversify beyond carbon-based energy sources becomes even greater”.

Volker Beckers, chair of ACP, added that the GMPF’s investment was “a clear reflection of the growing institutional demand for access to high-quality community-scale renewable energy projects.”