Funding the UK’s clean energy transition

Delivering the UK’s Clean Power mission is one of the largest infrastructure investment programmes undertaken in recent decades. The challenge is not lack of capital, but instead, how that capital is deployed.

This report by Standard Life and Santander explores how the UK financing ecosystem can evolve to help unlock investment at scale. While banks, institutional investors, project developers and public finance institutions all have important and complementary roles to play, financing structures need to better align long-term capital across the project lifecycle.

Drawing on modelling and stakeholder engagement, the report identifies practical solutions to increase institutional investor participation in project finance alongside banks, enabling banks to recycle capital more efficiently, reduce financing costs for developers and ultimately deliver better value for UK plc.

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At a glance

Key findings

• The investment challenge is significant, but solvable. Delivering the UK’s clean energy transition and maintaining progress towards net zero will require substantial investment in renewable generation, electricity networks, energy storage and emerging low-carbon technologies. The scale is unprecedented, but the UK has deep pools of private capital that could support delivery.
• The current financing model may come under pressure. Bank-led project finance has played a central role in the UK’s renewable energy success, but longer asset lives, larger capital requirements and longer-duration revenue contracts means there are opportunities to broaden participation from institutional investors alongside banks, helping diversify sources of capital and support continued growth in project delivery.
• Institutional investors can play a greater role, but barriers remain. Insurers and pension funds are naturally aligned with long-duration infrastructure assets, but participation remains concentrated in operational and investment-grade projects due to a number of barriers. Credit risk, scale, a lack of standardisation and inertia are preventing institutional investors from participating at scale in clean energy project finance.
• Practical financing solutions can unlock investment. Guarantees, blended finance structures, aggregation, standardisation and greater collaboration can improve project credit quality, scale investable projects and enable more effective allocation of risk.

What needs to change?

Achieving the UK’s clean energy ambitions is not just about raising more capital, it is about deploying it more effectively.

The report identifies five practical solutions that can unlock investment at scale:

1. Credit enhancement guarantees: Improve project credit quality and enable institutional investors to participate earlier, lowering financing costs and supporting capital recycling.
2. Blended finance: Combine bank and institutional capital to better match risk profiles with long-term cash flows, reducing refinancing risk and overall cost of capital.
3. Aggregation: Pool smaller projects into investable portfolios, creating scale and enabling access to institutional capital.
4. Standardisation: Develop repeatable financing structures to reduce complexity, lower costs and accelerate deployment.
5. Collaboration: Strengthen coordination between banks, institutional investors, project developers and public finance institutions to allocate capital more efficiently across the system.

Together, these solutions can enable capital to flow at greater scale and pace, supporting delivery of the UK’s clean energy ambitions.