Utility Week

UTILITY WEEK | 27TH MARCH - 2ND APRIL 2020 | 17 Finance & Investment A s we enter the "decade of delivery", the last ten years to implement the global goals agreed in Paris in 2015, time is of the essence. Net zero and its associated targets feature high on political agendas but what's needed now is action. At ScottishPower, we now generate 100 per cent green electricity a• er becoming the rst integrated utility in the UK to shi• com- pletely from coal and gas to wind in 2018. And we have an ambitious pipeline of wind, solar and battery projects that will deliver investment, create jobs and power our lives in the most economical way possible. All while helping tackle a climate emergency. I n today's evolving energy system, infrastructure investors are faced with an existential question about whether the space still presents the possibility for predictable investment. Roles that were once de ned and distinct across the utility and oil and gas landscapes are now merging together, thanks to the introduction of new incumbents from across industries. And while opportunity and margin continue to exist, there remains a standing question about long-term certainty. Traditionally, infrastructure investors made predictions related to market dynam- ics and pricing over a 10 to 15-year period; today it is diŒ cult to look beyond a two to three-year period without the involvement of subsidies or regulated returns. The current combination of technology, market, regula- Brought to you in association with Key takeaways 1. Net zero targets cre- ate many opportunities for investors. The CCC estimates £20 billion of investment per year will be needed in the power sector until 2050 – £9 billion a year more than the current annual investment. 2. Utilities' social contracts must be fully aligned with the national agenda to address climate change. 3. Some investor frustration at pace of UK infrastructure rollout. 4. Current regulatory models largely welcomed by investors. 5. Positive response to re-opening of CfD auctions to traditional renewables 6. Fossil fuel divestment continues. 7. New investment models emerging as net-zero transition continues. "Stakeholders have got to constantly adapt" "The time to act on renewable infrastrucure is now" Expert view Andrew Perry, Oliver Wyman Expert view Malcolm Paterson, ScottishPower Renewables "The time to act on renewable tory, and customer factors contribute to a changing competitive landscape, resulting in an array of possible outcomes for the sector. Decarbonisation – speci cally with regards net zero – is further localising the outlook for energy investment, as solutions are increasingly dependent on speci c cir- cumstances. For instance, real estate opera- tors have an opportunity to develop solar on the roo• ops of their commercial property portfolios at very low opportunity cost. Likewise, energy solutions that meet speci c business needs, such as EV charging stations, battery storage and decentralised generation, o– er the opportunity to bundle contracted assets at good returns, but are hard to scale because they depend on local market and customer factors. To thrive in this new landscape, investors need to incorporate commercial adaptability into their strategic planning. This involves not only remaining aware of current market dynamics and how they are changing, but also continuously evaluating their commer- cial model to adapt. Rather than rely on oth- ers to de ne the path forward, stakeholders – be they governments, regulators, investors, or businesses – need to continually iterate and evaluate trade-o– s to succeed. Andrew Perry, principal, Energy Practice, Oliver Wyman There is no shortage of funding for large renewable projects, but investor con - dence is driven by certainty coupled with a long-term plan that turns the ambition of achieving net zero into reality. A reality that the Committee on Climate Change suggests could see electricity demand double by 2050. With wind and solar forecast to provide over 50 per cent of supply, it is crucial the UK maintains a sustainable, competitive and secure energy model, regulated in a predict- able and stable way. The government's consultation on the next contracts for di– erence allocation, which seeks to open it up for onshore wind and solar projects, is a welcome boost, and it's also one of the rst clear signs that gov- ernment is serious about net zero by 2050. If that commitment is to become a real- ity, we expect to see broader support from government to match it. An electric economy will require signi cant investment now in a smarter, more ™ exible network to support the growth of renewables and the time to act is now. Malcolm Paterson, business development director, ScottishPower Renewables. • the pace of national government policy and funding for critical national infrastructure • investment in the face of climate change • effects on infrastructure investment of macroeconomic uncertainty • fossil fuel divestment Big issues:

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