Three key takeaways from the UK energy white paper

Long-awaited and finally released, there are significant opportunities and warning signs for investors to be aware of.

British readers will be familiar with the idiom of “waiting ages for a bus and then two come at once” and it seems the UK government has taken a similar approach to its infrastructure policy.

Late last month saw the release of the national infrastructure strategy, a delayed launch from its original March date. This week, the government’s energy white paper was released, despite previous promises it would be seen in 2019.

Worth the wait? The decarbonisation process waits for no one, although as Gareth Miller chief executive of energy consultancy Cornwall Insight noted, the white paper represents “the biggest change to the energy markets since the Electricity Act of 1989”. Indeed, there is much to unpack for investors and consumers alike.

Below, we share some of the main points of the overarching policy.

Brand Britannia to rule the waves

The expansion of offshore wind forms a key plank of the white paper, reiterating prime minister Boris Johnson’s recent pledge of the UK having 40GW of offshore wind capacity by 2030, with an additional 1GW of floating wind also targeted. The UK’s current “world-beating” offshore wind capacity, to borrow a Johnsonian term, stands at around 10.4GW.

However, future owners of these projects have been issued a stark warning. The energy white paper says “more stringent requirements” from its successful contracts for difference auction will be put in place to ensure at least 60 percent of the supply chain in projects is built in the UK, with less than half of that currently in place. Failure to comply with this could lead to a disqualification from the CfD process. With most turbines manufactured abroad, Britain had better get building.

Wanted: investors to hit the nuclear button

Both the national infrastructure strategy and the white paper are rare but admirable forms of significant long-term policy. However, the UK has a notable issue that needs fixing over the next few years.

All but one of the plants generating the country’s 8.9GW of nuclear capacity is due to come offline by 2030, and the issues with the ongoing construction of the Hinkley plant are well-documented. To add pressure, 2020 saw two other projects fall by the wayside, with developers unable to make them economical. With coal also set to come offline by 2024, Britain has a power vacuum approaching.

As such, the energy white paper states that the government sees the Regulated Asset Base model – used successfully to fund the Thames Tideway project – as “credible for funding” new nuclear sites, and able to entice pension and infrastructure funds to invest in the sector. The power gap means it would certainly be essential infrastructure, but will the lesser-risk RAB model be enough to make it an infrastructure investment?

Goodbye gas, hello…?

Is this the end for natural gas being described as a “transition fuel”? When it comes to heating, the white paper says Britain wants to “transition completely away from traditional natural gas boilers” by 2035.

As outlined in our recent Deep Dive, there will be plenty raising their hands at this point to advocate hydrogen as a replacement, and the paper commits to 5GW of green hydrogen by 2030. However, it says electric heat pumps, hydrogen and green gas “all have their part to play”.

With the EU targeting 4GW of hydrogen by 2024, the UK seems to be positioning itself more as an active spectator of the hydrogen revolution.


This is the last Week in Review of 2020. The editorial team at Infrastructure Investor wishes you a happy festive period and we look forward to providing you with more insight and analysis of the global infrastructure market in 2021.

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