Net zero target presents a £350bn investment opportunity

The net zero target is a £350bn investment opportunity for the energy sector over the next 30 years, though action is needed for it to be realised.

On 2 March, LCP published a paper, setting out the scale of investment opportunities for untapped private capital in helping the government achieve both its 2050 goal and the targets within the energy white paper. It outlined how investment of £12bn per year is needed in existing technologies such as wind and solar, as well as battery storage and innovative new ones, including hydrogen, to reach net zero.

Under a business-as-usual progression, there is likely to be a £100bn private investment gap over the next decade. It is a gap that can be bridged, however, with the report claiming there is “huge untapped investment potential” if the energy industry thinks differently about the assets. Current levels of investment get framed as there being a lack of demand from investors, wit h the report suggesting there is, instead, a lack of supply.

Citing offshore wind, it noted less than 30% of UK offshore wind assets are in the hands of long-term investors, despite demand for more. Developers could divest projects, it suggested, making more assets available to end investors over time, while it also recommended asset developers widen investment options beyond equity assets to bonds. This would suit the maturity of technologies and appetites of different investors.

For government, it called for action around policy and financial mechanisms to encourage investment in energy infrastructure. It recommended caution in the mandate of the National Infrastructure Bank, warning it should avoid crowding out private sector finance. It also stressed the need to address issues that have disincentivised UK infrastructure investors in the past, including political uncertainty, the threat of nationalisation, the politicisation of regulators and failure of large contractors, while recommending government is open to new approaches for private/public partnership – particularly from investors with experience of making this work.