£400bn additional infrastructure spend needed to meet Net Zero

A new report has claimed that up to £400 billion of investment is required in green infrastructure over the next decade if the UK is to meet its ambitious Net Zero target.

The PwC report, commissioned by the Global Infrastructure Investment Association, outlines how existing UK infrastructure requires significant investment to deliver Net Zero. The report estimates that £40 billion investment per year is required in new low carbon and digital infrastructure, if the government’s 2050 target is to be met.

Such spend represents nearly doubling current capital requirements, based on the UK’s Infrastructure Delivery Plan, which called for more than £20 billion of annual private investment in Real Assets sectors such as energy, water and telecoms in 2019.

Because government finances are likely to be stretched post-coronavirus, the Unlocking Capital for Net Zero Infrastructure report says that private investment will be critical to achieving the required increases in spending to revolutionise infrastructure in power systems, buildings and industry, transport and digital.

The report states that for more than half of the required £40 billion per annum investment requirement, there is currently no policy framework to provide investors with sufficient confidence in long-term revenues and returns. This means that investment in these assets has a relatively high risk and therefore the cost of financing is high, and in many cases may prove prohibitive.

The report makes five key recommendations for the government to accelerate private infrastructure investment: create a detailed Net Zero infrastructure roadmap for power systems, buildings and industry, transport and digital; identify and further develop revenue support mechanisms to drive efficient, timely and scaled roll-out of each Net Zero asset class; work with private sector investors to deliver increased public/private investment in emerging infrastructure technologies; implement best practice in infrastructure funding across UK regions and in other countries to accelerate investment; and provide clear strategic policy guidance to regulators to strike the right balance between consumer interests today and in the future.

Colin Smith, Infrastructure Deals leader, PwC, said: “The UK’s Net Zero target is an important marker in addressing the  global climate crisis, but reaching this ambitious milestone will require huge sums of investment - both in new technologies and accompanying infrastructure. We know the capital and the desire to invest are there, but investors tell us that some of the structures needed to harness this are not.  

“For the UK to fully succeed in its ambition, we believe government has a critical role to play in making net zero investment work - by creating a clear vision for investment in our power networks, buildings and industry, our transport links and digital connectivity. Clear targets will be needed for each asset class and enabling policy frameworks developed to drive confidence and predictability in revenue streams. The post-Covid-19 landscape will provide us with a once-in-a-lifetime opportunity to transition to a low-carbon future, harnessing the forces of recovery towards a greener, fairer and more resilient economy."

Lawrence Slade, chief executive officer, GIIA, added: “Private capital stands ready to help turn the UK’s ambitious net zero agenda into reality through the delivery of environmentally and socially responsible infrastructure, but investors need additional clarity from government around the policy and regulatory framework that will cover these investments. The delivery of a clear and compelling Net Zero infrastructure roadmap is a crucial first step in unlocking the investment needed to decarbonise our economy and ensure a cleaner, greener future.”