The creation of the UK’s Green Investment Bank (GIB) in 2012 was a smart and successful approach to driving the growth of the renewable energy industry. However, it was too small in scale. The GIB played a crucial role in attracting co-investment and private capital into early-stage renewables, fostering diversification and building confidence in emerging technologies. After fulfilling its initial purpose, it was eventually privatized.
While the GIB achieved modest success, it lacked the necessary size to develop major projects such as nuclear plants, large-scale energy efficiency initiatives, and battery gigafactories. The government could have made the GIB more comprehensive, well-funded, and capable of tackling these significant endeavors.
When the UK Infrastructure Bank was established, it presented a fresh opportunity. However, the bank has primarily focused on debt rather than equity, which may not have been the most effective approach.
The government’s current funding plan for carbon capture, as seen in the proposals for Sizewell C, utilizes financial incentives to mobilize significant capital. However, the process is slow and involves complex negotiations for each project, lacking comprehensive support for technological innovation and scaling up. A more holistic approach is needed for the next wave of projects.
One potential solution is to evolve the GIB into a vehicle that can transfer from the current shareholder executive stakes in state-owned companies. This would require a bolder approach from the government. Shadow Chancellor Rachel Reeves has advocated for the creation of a “more active state” that pursues a modern industrial strategy and collaborates with a dynamic open market, playing to the strengths of the government.
Without this kind of vision, it is difficult to see how Grant Shapps’ new department, no matter how impactful its name, can effectively implement the proposed Energy Bill, which aims to mobilize £100 billion of private investment by 2030.
Recognizing that the market gap lies in equity capital rather than debt would be a crucial step for the UK to accelerate further. Currently, the government’s ambition is not ambitious enough.
Cyrus Kapadia is the Chief Executive of Lazard UK.
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