With just five years left to meet the government’s 2030 decarbonisation targets, Phil Kent, CEO of Gravis, comments on the challenges and opportunities in the infrastructure space.
New politics, new opportunities
“The UK’s new political landscape looks set to kick-start a number of opportunities for infrastructure investors,” comments Phil Kent, CEO at Gravis Capital Management.
“We are still within the first 100 days of the new Labour government, but it has set its sights on ambitious targets. Importantly, it has repositioned energy transition and decarbonisation as key policies, putting them at the forefront of the party’s agenda.
“Two funding bodies have already been established. The first is the National Wealth Fund, which has a target of finding £3 of private investment for every £1 it invests. We expect to hear further details later this month at the National Investment Summit.
“The second is GB Energy, which has been established as a publicly-owned energy production company, with the objective of developing, owning and operating clean power projects.
“Mission Control has also been established to deliver the 2030 decarbonisation commitment – a difficult ask from where we are today – and intended reforms to streamline planning across infrastructure projects has been welcome.
“We’ve also heard rumours of a return of PFI (Private Finance Initiative). With a significant budget hole in the capital investment required in sectors such as prisons, schools and healthcare, this points to procurement of private sector finance as a potential solution.
The scale of the challenge
“The path to decarbonisation will not be without its obstacles, however,” continued Phil. “Over the next five years, the UK’s infrastructure sector faces immense pressure to ramp up development, especially if it aims to meet the 2030 electricity grid decarbonisation deadline.
“For example, today’s 57GW installed renewable capacity is targeted to double to 140GW. Given the last CfD round secured 9.6GW and there is potentially only one more auction round left to procure capacity that would be ready for 2030, the scale of the challenge should not be underestimated.
“To meet the 2050 target, we need to move from 1 million electric vehicles on the road to 37 million, and install 12-28 million heat pumps. To put the latter into context, we installed just 215,000 in the last five years.
“Encouragingly, the foundations for growth, such as hydrogen and carbon removal business models, are being laid. This will be important for the decarbonisation of industrial sectors, which are responsible for 25% of total UK emissions,” adds Phil.
“The biomethane sector is also ripe for investment as we explore its role in achieving decarbonisation targets across electricity, heat and transport. Similarly, new ventures in decarbonising agriculture and sustainable packaging present exciting prospects.
“The breadth of focus suggests that the UK could become a pivotal investment hub for decarbonisation. The government’s support for these initiatives, paired with innovative market mechanisms, lays a strong foundation for future growth.”
Gravis’s credentials in the renewable energy infrastructure space
Gravis was founded with an entrepreneurial investment philosophy and has an established track record as an early investor in the infrastructure sector.
Here is a flavour of our involvement:
2011: Gravis becomes one of the first significant backers of domestic rooftop solar projects in the UK through its loan to A Shade Greener. This exposure has grown to c. 45,000 systems.
2013: Gravis invests in a portfolio of 15 small-scale on-farm Anaerobic Digestions plants, becoming one of the first lenders to the sector, and lends to one of the first waste wood power stations to be developed in the UK.
2014: Gravis becomes one of the first senior lenders in the supported living sector, when it invests in a portfolio of accommodation for housing vulnerable adults.
2018: Gravis finances battery storage assets owned by Eelpower, an early mover in the UK battery storage market, and Race Bank as an early financial investor in offshore wind.
2020: Gravis lends to fund the drilling of the second commercial deep geothermal well project in the UK and accompanying heat network.
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