Hitting net-zero target presents £350bn energy opportunity

A new report, Aligning the Stars: Asset owners and energy investment toward net-zero, reveals the scale of investment opportunities for private capital in helping the Government to achieve its net-zero targets and those outlined in the energy white paper.

Commissioned by LCP, the report outlines how releasing untapped private capital the energy sector could develop investible assets of £350bn over the next 30 years as the sector increases its investment in and deployment of technology and assets needed to decarbonise the UK economy. This scale of investment equates to £12bn per year, every year until 2050. Existing renewable technologies such as wind and solar, alongside battery storage will lead the way, as well as creating new opportunities in innovative technologies such as hydrogen.

Analysis by LCP in the report highlights two different scenarios and the scale of investment that could play out in the coming years: A “business-as-usual” scenario would see UK asset owners extending their infrastructure investments over the next decade to £70bn, leaving a funding gap of c£100bn by 203. Or a more optimistic scenario that sees UK asset owners increasing their exposure alongside global asset owners and the Government. With careful design and targeting of investments, up to £125bn could be invested over the next decade and the required £350bn by 2050.

Commenting on the report’s findings, Dan Mikulskis investment partner at, LCP said: “We see something really big coming here – an infrastructure build out that few people have yet grasped the scale of. At the same time the often heard “unlocking private capital” cliché we think frames the whole thing the wrong way. We think there is huge untapped investment potential if the energy industry thinks differently about the assets.”

UK asset owners have invested c£45 billion in infrastructure assets from offshore wind, to biomass, solar and sewers, alongside asset owners from the Netherlands, Australia, Canada in the last decade, but to increase this appeal, the energy sector will need to work with investors to bring forward enough of the right assets at the right risk/return levels and quantity to interest global asset owners notes the report.

The current levels of investment are often framed as a lack of demand from investors, but the problem has in fact been a lack of supply, with assets at the right risk return levels. Asset developers need to better understand that investors have a range of interests and move away from the assumption that equity assets are the only game in town for investors, given that bonds for instance, are by far the largest holding of corporate DB pension funds.

The report also highlights the amount of private capital seeking good long-term investments which is likely to be open to investing in UK energy infrastructure and explores how the industry can attract visitors. This includes developers divesting projects to make more assets available to end investors over time and looking as different types of financing asset packaging, such as bonds as rather than equity to suit the appetites of different investors.

Report here.

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