Britain has more ways to fund energy infrastructure, but finance cannot make up for policy, delivery or planning weaknesses.
There are few areas of public policy in Britain as ambitious, or as demanding, as the transformation now expected of our energy infrastructure. Across successive governments there has been a notable continuity in the headline aims: decarbonise power, improve energy security, electrify heat and transport and support growth. The question now is whether the frameworks around the ambition are strong enough to deliver at the pace required.
This is not only a matter of raising additional funds. After decades in which much energy infrastructure investment was incremental, there is a need to renew ageing assets, reinforce networks, build low-carbon generation, support storage and flexibility and adapt the system to today’s electricity driven economy.
The changes that this will bring about impact on the environment as much as on investors. The transition requires substations, overhead lines, underground cables, solar farms, wind projects, battery schemes, hydrogen assets and carbon transport infrastructure. This will affect landscapes, habitats, local roads and communities. So though it is tempting to treat funding, planning and environmental consent as separate workstreams, in practice they are part of the same challenge.
A broader toolkit
Mostly the sector has responded to the challenge by adapting established models, rather than creating new models. This understandably appeals to investors who usually prefer mechanisms they understand, especially where higher interest rates, volatile supply chains and construction inflation have made project economics more sensitive to delay.
Contracts for Difference (CfD) remain central to the deployment of mature renewable technologies. They reduce exposure to wholesale price volatility and give developers and funders a more reliable view of revenue. Their influence now reaches beyond offshore wind because they have helped shape the market’s understanding of reasonable risk allocation in capital-intensive clean energy.
Yet CfDs cannot do everything. They work best where output is predictable and the value of the project can be captured through the sale of electricity. They are less well suited to assets whose value lies in system resilience, network efficiency or enabling other schemes to connect. That is why regulated models, state-backed guarantees and public co-investment have become more important. This is not a retreat from private finance, but a recognition that some risks cannot realistically be priced by the market at the outset.
The environmental test and the delivery test
From a consents perspective, time is of the essence, and this includes achieving public confidence and environmental quality – two factors which cannot be rushed. While clean energy infrastructure is needed nationally, its effects are often felt locally and immediately.
Networks are particularly pertinent. Reinforcement is essential if renewable generation is to reach homes, businesses, data centres and industry. But new grid infrastructure is also highly visible, politically sensitive and often contested. A funding model may be bankable, yet still fail to translate into delivery if land, planning, ecology and community engagement are treated as late-stage obstacles rather than core project risks.
The same applies to storage, hydrogen and carbon transport infrastructure. These assets are often described as system-critical and require certainty. If the revenue model remains uncertain and the consenting route is slow, the asset will struggle to move from strategy to construction.
What needs to change
The next phase of delivery should be less about inventing new funding devices and more about using the existing funding devices with discipline. In this context, policy durability and policy design are vital. Investors can handle complexity but are less tolerant of review cycles that reopen settled questions and programmes that change direction before they have had time to work.
There also needs to be consideration as to how much risk the public sector can bear, for example in relation to early-stage coordination, strategic network investment, novel technologies and assets that provide value across the whole system are obvious examples. Trying to pass these risks wholesale to the private sector rarely produces value. It usually produces a higher price, a thinner market or slower delivery.
Projects need to bring finance, planning, land, ecology and engagement together earlier. Early work often makes scrutiny more meaningful: the better a project understands its impacts, alternatives and mitigation at the outset, the less likely it is to be derailed later by issues that should have been anticipated.
Britain is finding new ways to fund energy infrastructure, and that should be welcomed. Its regulatory institutions are sophisticated, its capital markets are deep and the willingness to adapt is greater than is sometimes acknowledged. But finance will not by itself deliver the transition. The harder task is to create enough confidence – in policy, consenting and coordination – for capital to move quickly into projects that can be built.
David Walker is Head of Infrastructure Consents at multi-disciplinary property consultancy Carter Jonas.
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