Research from Santander and Standard Life puts the UK’s clean energy investment requirement above £500 billion by 2040, roughly £40 billion a year, and says today’s financing structures can’t carry it.
The two institutions have published joint research setting out the scale of the task. Delivering the UK’s clean energy ambitions will take over £500 billion of investment by 2040. That works out at roughly £40 billion a year on average.
Spending on that scale would strain traditional financing structures, the report says. So the authors spend less time on the headline number and more on how capital moves through the system.
Five proposed fixes
The report identifies five routes to close the gap. They are credit enhancement guarantees, blended finance, aggregation, standardisation, and closer collaboration between banks, institutional investors, project developers and public finance institutions.
Each addresses a different friction. Guarantees and blended finance shift risk away from the parties least able to price it. Aggregation and standardisation make small or bespoke projects legible to large investors. Collaboration is the softest of the five, and probably the hardest to deliver.
Allocation rather than scarcity
Benedict Smith, head of specialised and project finance at Santander UK, said collaboration is the precondition for meeting the targets. “The research we have undertaken with Standard Life shows that collaboration between banks, insurers, institutional investors and other financial institutions, as well as developers and government, will be essential for the UK to reach its clean energy goals,” he said.
He then framed the problem as one of allocation. “The challenge going forward is not just in raising more capital, but in creating more efficient, productive mechanisms for the allocation of this capital across the financing ecosystem, and aligning it effectively with project risk,” Smith added.
Where the money already sits
Manuel Dusina, head of real assets at Standard Life, argued the capital already exists. “The UK has no shortage of long-term capital available to help support the energy transition,” he said. “The challenge is ensuring that capital can be deployed efficiently, with the right investors financing the right risks at the right stage of a project’s lifecycle.”
Dusina also pushed back on the idea that banks and institutions compete for the same deals. “Our research shows that banks and institutional investors should not be viewed as competing sources of capital, but rather as complementary partners,” he said.
He set one condition on mobilising that money. Projects need investable structures with a sensible balance of risk and return, supported where necessary by greater standardisation, aggregation and targeted public-sector risk sharing.
