UKSIF sees energy transition accelerating in 2025
The UK Sustainable Investment and Finance Association is optimistic the country's energy transition will accelerate in 2025 and is looking for more positive policy signals and clarity on how the National Wealth Fund and Great British Energy will invest for its membership.
The UK government unveiled its Clean Power 2030 Action Plan in December, which sets out how it intends to achieve its "clean power goal" of generating at least 95% of Britain's electricity consumption from clean sources by 2030.
The ambitious and wide-reaching action plan describes how the government will work with the clean power sector to achieve targets, including on planning and consenting, project delivery, the workforce, supply chains and reform of grid connections and the electricity market, which are some of the signals that investors need.
"Broadly, we're feeling quite optimistic. I think with the new government and the advent of these institutions, we'll really see things take off in 2025," said Madison Reamsbottom, head of governance and strategy at UKSIF.
"We would like to see both institutions come to the fore with some clarity, because investors are going to want that consistency before they invest."
UKSIF sees the National Wealth Fund as ready to invest, while it said GB Energy will take longer to set up over the next few years and is urging both organisations to capitalise on their position to avoid crowding out or competing with private finance.
"One area where we could see them focusing their energies is maybe some of those other technologies that can really use that de-risking support, like the grid, battery storage and hydrogen," Reamsbottom said.
"We're really hopeful that GB Energy and the National Wealth Fund are able to help with some of that de-risking, but private finance is waiting to crowd in, we just need the right enablers in place."
"Catalyse private investment"
The NWF will inherit the UK Infrastructure Bank's £22bn capitalisation and has been allocated an additional £5.8bn to lend and invest, which chancellor Rachel Reeves said will "catalyse over £70bn of private investments in the UK's clean energy and growth industries".
The NWF will use initiatives that boost private investment, including financial instruments such as performance guarantees and blended finance, with government departments taking additional risk to increase the impact of individual deals.
GB Energy is a new, publicly owned and operationally independent clean energy company that will be headquartered in Aberdeen and is backed by £8.3bn of new money to create jobs, boost energy independence, and provide clean, secure energy for UK taxpayers.
The government is still setting up GB Energy and has announced £25m to establish the company, with a further £100m of capital funding to spend in 2025/26 and is establishing how it will work with the National Wealth Fund to invest quickly.
The UK government has also announced progress on a wide range of other decarbonisation initiatives, including carbon capture and storage projects and a market intervention to de-risk investment in hydrogen by developing a hydrogen to power business model that marks a significant step towards integrating hydrogen into the national energy system.
"Creating a pipeline"
In addition to the work underway to comply with the UK's Sustainability Disclosure Requirements, a fund labelling regime that was introduced in August 2023, a consultation on a UK Taxonomy is open for responses until February 6.
A consultation is also expected on the ISSB’s standards application in the UK by way of the future UK Sustainability Reporting Standards, and a consultation is expected in the second half of the year on mandatory transition planning following the work of the Transition Plan Taskforce.
The UK government is also making progress towards implementing a Carbon Border Adjustment Mechanism, similar to the European Union, which UKSIF sees as "hugely positive" as it would create market incentives for companies to decarbonise and transition to more sustainable activities and create a level playing field between UK and non-UK companies.
All of these measures are aiming to attract investment and boost economic growth, which is a priority for Reeves, and investors are awaiting further details.
"If the UK is wanting to see more investment into the UK, the focus has to be on creating a pipeline of investable projects in order to attract that investment. And again, that's that planning commission, grid connectivity, and then policy clarity and certainty over sector decarbonisation plans," Reamsbottom said.