Low-Interest Renewable Energy Loans

Polly Toynbee, in the Guardian today, wonders how commited Brown will be to direct intervention in markets (e.g. guaranteeing electricity prices for secure investment in solar technologies) to usher in his "Marshall Plan" for a "fourth technological revolution" on the environment.

Brown's Marshall Plan comment was interesting. Here's how the Marshall Plan worked.

- Europe decided which country should get what (based on what each country declared it needed).
- An American-created bureaucracy (the ECA) arranged for the transfer of goods from American suppliers.
- The US supplier was paid in dollars credited against Marshall Plan funds.
- The European recipient was not given the food, feed, fertiliser, fuel or raw materials as a gift, but had to pay for them in local currency. The local current was deposited by the government in a counterpart fund.

This money, in turn, could be used by the ERP countries for further investment projects. Most of the participating ERP countries were aware from the start that they would never have to return the counterpart fund money to the U.S., and it was eventually absorbed into their national budgets and disappeared. Germany, however, was left in doubt - would it have to repay its debts? This uncertainty was to have a very positive effect ... [Germany] insisted from the beginning that the money could only be given out as loans subject to interest - a revolving system which ensured that the funds would grow rather than shrink ... The money Germany owed the U.S. was paid back in installments (the last check was handed over in June, 1971) and interestingly enough, did not come from the ERP pot, but from the federal budget. The Special Fund, now supervised by the federal economics ministry, kept growing: in 1971, it was over DM 10 billion. Today it has reached more than DM 23 billion. And thanks to the revolving loan system, by the end of 1995, the Fund had made low-interest loans amounting to around DM 140 billion.

Gordon Brown has a choice. It's a biggie. Does he choose to intervene in a top-down way, or in a rolling, Germany-Marshall-Plan, bottom-up way?

He could spend £40 billion on perfectly worthwhile sustainable development projects over the next few years.

Or he could take £40 billion, and set up a fund to offer low-interest loans not just for 2008-2012, but for 2008 until 2038.

A six-panel array of domestic solar PV (high efficiency, 1kW) costs just under £10 000. The current grant available is only £2500. £40 billion divided by 4 million homes receiving a 1kW array leads to a £10000 low-interest loan (£13400 to be paid back, on a 3% loan over 10 years, that works out to £25 a week repayment).

Brown needs to realise that, more than ever more, there are millions of households out there who want to make a difference, and are probably willing to put £25 a week aside.