According to a recent report, £350 billion of investment in technologies such as hydrogen networks, renewables, and battery storage would be needed within the next 30 years to achieve the UK's net-zero transition.
LCP's report, titled Aligning the Stars: Asset Owners and energy investment toward Net Zero, emphasizes the vast investment opportunities for private capital in assisting the UK government in achieving its net-zero and energy white paper goals.
Within the next 30 years, LCP predicts that the energy industry will tap into untapped private capital to create “investible assets to the tune of £350bn” aimed at decarbonising the UK economy.
Until 2050, this level of spending equates to £12 billion per year.
Existing green technology like wind and solar, together with battery storage, will pave the way, while new opportunities in emerging technologies like hydrogen will emerge, according to LCP.
In the report, LCP examines two separate possibilities and the amount of investment that could be made in the upcoming years.
In a “business-as-usual” scenario, UK asset owners would increase their infrastructure investments to £70 billion over the next decade, leaving a funding gap of £100 billion by 2030.
In a more optimistic scenario, UK asset owners, along with international asset owners and the government, would increase their exposure.
Up to £125 billion could be invested over the next decade, and the required £350 billion by 2050, if investments are carefully designed and targeted.
Over the past ten years, the door between private investment and infrastructure has been "wide open," with UK asset owners spending £45 billion in infrastructure properties ranging from offshore wind to biomass, solar, and sewers, alongside asset owners from the Netherlands, Australia, Canada, and other countries.
The energy sector will need to partner with investors to bring forward enough of the right assets at the right risk/return levels and quantity to interest global asset owners, according to LCP's 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,” said the report.
Kyle Martin, head of market insight at LCP, said: “The Government’s Energy White Paper reaffirms that realising net-zero will require more than a one size fits all approach.
“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.”
The report concluded that over the medium term, the more well-known renewable energy technologies such as wind and solar will continue to provide the best investment opportunities and that the re-admission of onshore wind and solar to the next round of contract-for-difference auctions might boost project supply.
It may take years for emerging technology like battery storage or carbon capture to become investible, but they may eventually become official asset classes.