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Making the most of the energy
infrastructure investment surge

Making the most of the energy infrastructure investment surge

Published: 3rd December 2019
Area: Corporate & Commercial
Author: Peter Dilks

Utility infrastructure projects are currently in vogue, with highly reliable funding streams making them a dependable and ‘Brexit-proof’ form of investment. For energy companies who wish to profit from this demand, a varied asset portfolio and an in-depth understanding of the relevant legal elements is vital. So, what can businesses do to ensure they get a piece of the funding?

Renewable energy

The need to reduce carbon emissions has led to renewable energy sources increasing in popularity in recent years. This shift has brought with it a need for more flexible power generation to balance the frequency of the grid. Such balancing services also offer energy security should a large-scale blackout occur. As a result, the market for small-scale utility projects is thriving, and the current climate of economic uncertainty is increasing the security of these investments.

Battery storage developments

The resilience of the grid is at the forefront of the sector’s mind, in particular due to the need to improve the UK’s energy security on leaving the EU. This has caused many investors to look to battery storage developments, which could be essential should the UK’s access to EU interconnectors become more difficult after Brexit. Battery storage technology allows renewable energy peaks to be harnessed, while mitigating the inevitable troughs associated with this method of power generation.

Funding options

The challenges of securing traditional private equity finance are well-recognised, so energy companies are now increasingly turning to alternative funding options, including:

Corporate power purchase agreements – These are the most common alternative and involve securing long-term contracts with large end user organisations. Renewable PPAs provide both reputational and CSR benefits and can assist in balancing the portfolio during periods of low generation.

Government-backed contracts

Capacity Market – This has been critical for new projects looking to secure debt funding.

Portfolio diversity

For a while now, investors have been overwhelmed with a range of ‘shovel ready’ projects. To ensure they come to a final decision that will be successful in the long run, investors must assess the risks and rewards of a host of different projects.

Other ways of ensuring a project will succeed include using innovative technologies and developing a strong supply chain with an excellent track-record.

Legal pitfalls

There are certain legal and commercial pitfalls that could lead to delays and further complexity during the investment process. For example, easements for cabling or environmental points, such as the decommissioning and displacement of batteries.

Optimising the value of investments is all down to timing. If a third party doesn’t fully understand the process, then targets can be missed.

Grid developments and the need to improve the UK’s energy security means now is the perfect time to invest in utility infrastructure. Creating a diverse portfolio of projects and finding the right expert advice is key for businesses who wish to take advantage of this investment trend.

For further information or advice on this, or any other related matter, a member of our energy team can walk you through everything. Click here to discuss.

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