Clean private investment is required to increase by over £140bn over the next five years if the UK is to reach its net zero targets, states the New Economics Foundation (NEF).

If the UK is to attain its target of net zero by 2050, significant private investment is needed in the green energy space to spearhead innovation in technologies in addition to the development of low-carbon projects that could cause a domino effect for further projects.

Laid out in a report, it argues introducing a secondary, lower interest rate so green projects have access to cheaper loans would add a much-needed boost to the UK’s stagnating private sector investment, safeguard its net-zero ambitions, and help protect the country from future oil and gas price shocks.

Crucial to achieving net zero targets, according to the report, is private investment in carbon-cutting activities like home insulation and electric vehicle charging points which is needed to grow by an extra £140 billion over the next five years.

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NEF believes the UK economy is currently suffering from prolonged lack of investment with UK business investment having stagnated for the three years preceding the pandemic and also falling afterwards.

“In order to decarbonise our economy, we need billions in new green investment. But the UK has suffered from a prolonged lack of private sector investment for years,” said Lukasz Krebel, economist at the New Economics Foundation.

“Making matters worse, our ability to cut emissions fast enough to avoid climate catastrophe and reduce our dependence on volatile oil and gas is threatened when interest rates go up. Targeted cheaper lending for projects which will move us away from dangerous fossil fuels should be a no brainer.”

The report finds that higher interest rates risk scuppering UK legal targets to cut dangerous carbon emissions to net zero by 2050 and that stagnating green investment will make the UK more vulnerable to future energy price shocks.

Investment in net-zero projects like wind and solar farms have been hit harder by the higher cost of borrowing than more polluting alternatives, as they have higher upfront costs.

This provides an issue in green investment. Investors need an extra incentive to allocate funding into an area of the British industry that currently will not see substantial returns but will in the future.

Despite this, the battery energy storage market continues to do well, however risks becoming overcrowded which could see a drop in investment figures. To mitigate this, stacking value and optimisation will be a crucial component in maintaining attractive investment opportunities in battery energy storage, according to GridBeyond and Thrive Renewables in a white paper.

Despite significant commercial appetite for energy storage, more can be done to support strategic decision making and ensure maximum returns can be gained by investors on these assets.

The NEF report alternatively provides its own recommendations to support growing green investment in the renewable space.

This includes calling on the Bank of England to set up a secondary, lower interest rate via its existing Term Funding Scheme that protects vital green investments from rate hikes, boosts green activities, and reduces UK vulnerability to future energy price shocks.

As well as this, the new chancellor should give the Bank of England an annual target for boosting lending to green activities.

The final recommendation is for the Bank of England to set targets for how much commercial banks must lend to the green activities essential for reaching the UK’s net-zero targets.

Amidst the concerns over investment levels, Octopus Energy Group managed to raise US$550 million (£458.1 million) this year to bolster its Kraken energy tech platform and further drive renewables at scale.

Octopus said it would use the proceeds of the round to both improve on its Kraken platform, launched in 2019, and to invest in additional products and solutions that can “help solve the energy crisis and drive renewables at scale”.

On electric vehicle charging, which is cited as needing part of the £140 billion investment, Infracapital, the infrastructure equity investment arm of M&G Plc, invested £200 million into GRIDSERVE last month.

The funding is expected to help expand the electric vehicle infrastructure company’s Sun-to-Wheel model, which combines hybrid solar farms, its charging network of Electric Forecourts and Electric Hubs and the leasing of a wide range of the latest EVs.

Source: Current News

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