Net zero could provide a £350 billion investment opportunity for the energy sector, releasing untapped private capital.
A new report from Lane Clark & Peacock’s (LCP) Energy Analytics said if the UK is to become net carbon neutral by 2050, investment and deployment of clean energy technology will need to scale up, presenting a significant opportunity for private capital.
Aligning the Stars: Asset owners and energy investment toward net zero, stated that £12 billion per year will need to be invested in existing technologies including wind, solar and battery storage and nascent technologies such as hydrogen every year for the next 30 years.
This is at the core of LCP’s more optimistic scenario, which sees carefully designed and targeted investments of up to £125 billion by 2030, expanding to £350 billion by 2050.
The analytics company also presented a ‘business-as-usual’ scenario which sees asset owners expand their infrastructure investments to £70 billion over the next decade, leaving a c.£100 billion funding gap by 2030.
Dan Mikulskis, investment partner at LCP, said few people are yet to grasp the scale of the infrastructure build out coming, adding “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.”
LCP pointed to the c.£45 billion invested in offshore wind, biomass, solar and sewers infrastructure over the past decade, and said there is a “huge amount of private capital seeking good long-term investments".
Asset developers should widen the investment options beyond equity assets to bonds, for instance, with the report also calling on government to encourage further investment through policy and financial mechanisms.
Already the government’s energy white paper has reaffirmed that reaching net zero will require “more than a one size fits all approach” said Kyle Martin, head of market insight at LCP.
“There is a broad diversification in both the technologies and assets that will be required, from existing technologies such as wind and solar that will need to be deployed more widely, to emerging technologies such as hydrogen and carbon capture that are still in their infancy.
"There will be a lot of eyes on the Chancellor tomorrow and whether he signals a kick-start to the boom of investment opportunities that will be needed over the next 30 years.”