IDEAS home Printed from https://ideas.repec.org/a/eee/enepol/v87y2015icp607-622.html
   My bibliography  Save this article

Financing the UK power sector: Is the money available?

Author

Listed:
  • Blyth, William
  • McCarthy, Rory
  • Gross, Robert

Abstract

The UK power generation sector faces a major new round of investment: the coincidence of asset retiring and ambitious goals for decarbonisation is not unique, but is particularly acute in the UK. The UK government has put in place a raft of new policies that seek to promote new, low carbon investment and ensure security of supply. The traditional channel for financing the sector has been through large utility companies, but this now looks challenging for various reasons. The UK therefore offers an interesting case study on several counts; the scale of the challenge, effectiveness of new policies, and the availability of alternative finance. We find that the link between the finance sector and the electricity sector is not ‘broken’, but the flow of money to the sector is threatened by the current weakness of the utilities’ business model. This paper compares estimates of the scale of investment required in the UK with historical investment rates. It summarises contemporary finance industry views of conditions and trends, and potential policy interventions that might be needed to bridge the investment gap. The potential for channelling institutional investor funds directly into energy assets is reviewed.

Suggested Citation

  • Blyth, William & McCarthy, Rory & Gross, Robert, 2015. "Financing the UK power sector: Is the money available?," Energy Policy, Elsevier, vol. 87(C), pages 607-622.
    • Handle: RePEc:eee:enepol:v:87:y:2015:i:c:p:607-622
    DOI: 10.1016/j.enpol.2015.08.028
    as

    Download full text from publisher

    File URL: http://www.sciencedirect.com/science/article/pii/S0301421515300720
    Download Restriction: Full text for ScienceDirect subscribers only
    File URL: https://libkey.io/10.1016/j.enpol.2015.08.028?utm_source=ideas
    LibKey link: if access is restricted and if your library uses this service, LibKey will redirect you to where you can use your library subscription to access this item
    ---><---

    As the access to this document is restricted, you may want to search for a different version of it.

    References listed on IDEAS

    as
    1. Ballet, Jérôme & Koffi, Jean-Marcel & Pelenc, Jérôme, 2013. "Environment, justice and the capability approach," Ecological Economics, Elsevier, vol. 85(C), pages 28-34.
    2. Polzin, Friedemann & Migendt, Michael & Täube, Florian A. & von Flotow, Paschen, 2015. "Public policy influence on renewable energy investments—A panel data study across OECD countries," Energy Policy, Elsevier, vol. 80(C), pages 98-111.
    3. Christopher Kaminker & Fiona Stewart, 2012. "The Role of Institutional Investors in Financing Clean Energy," OECD Working Papers on Finance, Insurance and Private Pensions 23, OECD Publishing.
    4. Kapan, Tümer & Minoiu, Camelia, 2013. "Balance sheet strength and bank lending during the global financial crisis," Discussion Papers 33/2013, Deutsche Bundesbank.
    5. Sorrell, Steve, 2007. "Improving the evidence base for energy policy: The role of systematic reviews," Energy Policy, Elsevier, vol. 35(3), pages 1858-1871, March.
    6. Raffaele Della Croce, 2012. "Trends in Large Pension Fund Investment in Infrastructure," OECD Working Papers on Finance, Insurance and Private Pensions 29, OECD Publishing.
    7. Raffaele Della Croce & Christopher Kaminker & Fiona Stewart, 2011. "The Role of Pension Funds in Financing Green Growth Initiatives," OECD Working Papers on Finance, Insurance and Private Pensions 10, OECD Publishing.
    8. Henriot, Arthur, 2013. "Financing investment in the European electricity transmission network: Consequences on long-term sustainability of the TSOs financial structure," Energy Policy, Elsevier, vol. 62(C), pages 821-829.
    9. Bank for International Settlements, 2007. "Institutional investors, global savings and asset allocation," CGFS Papers, Bank for International Settlements, number 27, december.
    10. Mathews, John A. & Kidney, Sean & Mallon, Karl & Hughes, Mark, 2010. "Mobilizing private finance to drive an energy industrial revolution," Energy Policy, Elsevier, vol. 38(7), pages 3263-3265, July.
    11. Dieter Helm, 2009. "Infrastructure investment, the cost of capital, and regulation: an assessment," Oxford Review of Economic Policy, Oxford University Press and Oxford Review of Economic Policy Limited, vol. 25(3), pages 307-326, Autumn.
    12. Alafita, T. & Pearce, J.M., 2014. "Securitization of residential solar photovoltaic assets: Costs, risks and uncertainty," Energy Policy, Elsevier, vol. 67(C), pages 488-498.
    13. Wüstenhagen, Rolf & Menichetti, Emanuela, 2012. "Strategic choices for renewable energy investment: Conceptual framework and opportunities for further research," Energy Policy, Elsevier, vol. 40(C), pages 1-10.
    14. Mawhood, Rebecca & Gross, Robert, 2014. "Institutional barriers to a ‘perfect’ policy: A case study of the Senegalese Rural Electrification Plan," Energy Policy, Elsevier, vol. 73(C), pages 480-490.
    Full references (including those not matched with items on IDEAS)

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Dimitrios Angelopoulos & Robert Brückmann & Filip JirouÅ¡ & Inga KonstantinaviÄ iÅ«tÄ— & Paul Noothout & John Psarras & Lucie Tesnière & Barbara Breitschopf, 2016. "Risks and cost of capital for onshore wind energy investments in EU countries," Energy & Environment, , vol. 27(1), pages 82-104, February.
    2. Onifade, Temitope Tunbi, 2016. "Hybrid renewable energy support policy in the power sector: The contracts for difference and capacity market case study," Energy Policy, Elsevier, vol. 95(C), pages 390-401.
    3. Hall, Stephen & Roelich, Katy E. & Davis, Mark E. & Holstenkamp, Lars, 2018. "Finance and justice in low-carbon energy transitions," Applied Energy, Elsevier, vol. 222(C), pages 772-780.
    4. Polzin, Friedemann & Sanders, Mark & Serebriakova, Alexandra, 2021. "Finance in global transition scenarios: Mapping investments by technology into finance needs by source," Energy Economics, Elsevier, vol. 99(C).
    5. Alfonso Aranda-Usón & Pilar Portillo-Tarragona & Luz María Marín-Vinuesa & Sabina Scarpellini, 2019. "Financial Resources for the Circular Economy: A Perspective from Businesses," Sustainability, MDPI, vol. 11(3), pages 1-23, February.
    6. Shoai-Tehrani, Bianka & Akimoto, Keigo & Sano, Fuminori, 2018. "Low-carbon investments from the perspective of electric utilities: The burden of the past," Utilities Policy, Elsevier, vol. 51(C), pages 18-32.
    7. Corina MURAFA, 2019. "Sources And Instruments Of Financing For The European Energy Sector: A Comparative Analysis Between Private, Public And Mixed Instruments," REVISTA DE MANAGEMENT COMPARAT INTERNATIONAL/REVIEW OF INTERNATIONAL COMPARATIVE MANAGEMENT, Faculty of Management, Academy of Economic Studies, Bucharest, Romania, vol. 20(3), pages 360-377, July.
    8. Parkes, Gareth & Spataru, Catalina, 2017. "Integrating the views and perceptions of UK energy professionals in future energy scenarios to inform policymakers," Energy Policy, Elsevier, vol. 104(C), pages 155-170.
    9. Contu, Davide & Mourato, Susana, 2020. "Complementing choice experiment with contingent valuation data: Individual preferences and views towards IV generation nuclear energy in the UK," Energy Policy, Elsevier, vol. 136(C).
    10. Barazza, Elsa & Strachan, Neil, 2020. "The impact of heterogeneous market players with bounded-rationality on the electricity sector low-carbon transition," Energy Policy, Elsevier, vol. 138(C).
    11. Geddes, Anna & Schmidt, Tobias S. & Steffen, Bjarne, 2018. "The multiple roles of state investment banks in low-carbon energy finance: An analysis of Australia, the UK and Germany," Energy Policy, Elsevier, vol. 115(C), pages 158-170.
    12. Brown, Donal & Sorrell, Steve & Kivimaa, Paula, 2019. "Worth the risk? An evaluation of alternative finance mechanisms for residential retrofit," Energy Policy, Elsevier, vol. 128(C), pages 418-430.
    13. Elie, Luc & Granier, Caroline & Rigot, Sandra, 2021. "The different types of renewable energy finance: A Bibliometric analysis," Energy Economics, Elsevier, vol. 93(C).
    14. Brocks, Annette & Nyangon, Joseph & Taminiau, Job, 2016. "Utility 2.0: A multi-dimensional review of New York’s Reforming the Energy Vision (REV) and Great Britain’s RIIO utility business models," MPRA Paper 91489, University Library of Munich, Germany, revised 30 Sep 2016.
    15. Davarzani, Sima & Pisica, Ioana & Taylor, Gareth A. & Munisami, Kevin J., 2021. "Residential Demand Response Strategies and Applications in Active Distribution Network Management," Renewable and Sustainable Energy Reviews, Elsevier, vol. 138(C).
    16. Polzin, Friedemann & Sanders, Mark, 2020. "How to finance the transition to low-carbon energy in Europe?," Energy Policy, Elsevier, vol. 147(C).
    17. Li, Yanbin & Zhao, Ke & Zhang, Feng, 2023. "Identification of key influencing factors to Chinese coal power enterprises transition in the context of carbon neutrality: A modified fuzzy DEMATEL approach," Energy, Elsevier, vol. 263(PA).

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. F.H.J. Polzin & M.W.J.L. Sanders & Florian Täube, 2017. "A diverse and resilient financial system for investments in the energy transition," Working Papers 17-03, Utrecht School of Economics.
    2. Polzin, Friedemann, 2017. "Mobilizing private finance for low-carbon innovation – A systematic review of barriers and solutions," Renewable and Sustainable Energy Reviews, Elsevier, vol. 77(C), pages 525-535.
    3. Best, Rohan & Burke, Paul J., 2018. "Adoption of solar and wind energy: The roles of carbon pricing and aggregate policy support," Energy Policy, Elsevier, vol. 118(C), pages 404-417.
    4. Polzin, Friedemann & Migendt, Michael & Täube, Florian A. & von Flotow, Paschen, 2015. "Public policy influence on renewable energy investments—A panel data study across OECD countries," Energy Policy, Elsevier, vol. 80(C), pages 98-111.
    5. Bobinaite, Viktorija & Tarvydas, Dalius, 2014. "Financing instruments and channels for the increasing production and consumption of renewable energy: Lithuanian case," Renewable and Sustainable Energy Reviews, Elsevier, vol. 38(C), pages 259-276.
    6. Curtin, Joseph & McInerney, Celine & Ó Gallachóir, Brian, 2017. "Financial incentives to mobilise local citizens as investors in low-carbon technologies: A systematic literature review," Renewable and Sustainable Energy Reviews, Elsevier, vol. 75(C), pages 534-547.
    7. Corrocher, Nicoletta & Cappa, Elisabetta, 2020. "The Role of public interventions in inducing private climate finance: An empirical analysis of the solar energy sector," Energy Policy, Elsevier, vol. 147(C).
    8. Polzin, Friedemann & Sanders, Mark & Serebriakova, Alexandra, 2021. "Finance in global transition scenarios: Mapping investments by technology into finance needs by source," Energy Economics, Elsevier, vol. 99(C).
    9. Duch-Brown, Néstor & Rossetti, Fiammetta, 2020. "Digital platforms across the European regional energy markets," Energy Policy, Elsevier, vol. 144(C).
    10. Shrimali, Gireesh & Nelson, David & Goel, Shobhit & Konda, Charith & Kumar, Raj, 2013. "Renewable deployment in India: Financing costs and implications for policy," Energy Policy, Elsevier, vol. 62(C), pages 28-43.
    11. Romano, Antonio A. & Scandurra, Giuseppe & Carfora, Alfonso & Fodor, Mate, 2017. "Renewable investments: The impact of green policies in developing and developed countries," Renewable and Sustainable Energy Reviews, Elsevier, vol. 68(P1), pages 738-747.
    12. Thiam Hee Ng, . "Bond Financing for Renewable Energy in Asia," Chapters, in: Shigeru Kimura & Youngho Chang & Yanfei Li (ed.), Financing Renewable Energy Development in East Asia Summit Countries A Primer of Effective Policy Instruments, chapter 11, pages 321-342, Economic Research Institute for ASEAN and East Asia (ERIA).
    13. Chen, Xia & Fu, Qiang & Chang, Chun-Ping, 2021. "What are the shocks of climate change on clean energy investment: A diversified exploration," Energy Economics, Elsevier, vol. 95(C).
    14. Sarah Hafner & Olivia James & Aled Jones, 2019. "A Scoping Review of Barriers to Investment in Climate Change Solutions," Sustainability, MDPI, vol. 11(11), pages 1-19, June.
    15. Henriot, Arthur, 2013. "Financing investment in the European electricity transmission network: Consequences on long-term sustainability of the TSOs financial structure," Energy Policy, Elsevier, vol. 62(C), pages 821-829.
    16. Mazzucato, Mariana & Semieniuk, Gregor, 2018. "Financing renewable energy: Who is financing what and why it matters," Technological Forecasting and Social Change, Elsevier, vol. 127(C), pages 8-22.
    17. Mara Hammerle & Paul Crosby & Rohan Best, 2021. "Super‐sizing Renewable Energy Investment: Examining the Portfolio Preferences of Superannuation Fund Members," The Economic Record, The Economic Society of Australia, vol. 97(317), pages 267-284, June.
    18. Polzin, Friedemann & Egli, Florian & Steffen, Bjarne & Schmidt, Tobias S., 2019. "How do policies mobilize private finance for renewable energy?—A systematic review with an investor perspective," Applied Energy, Elsevier, vol. 236(C), pages 1249-1268.
    19. Dragomirescu-Gaina, Catalin & Galariotis, Emilios & Philippas, Dionisis, 2021. "Chasing the ‘green bandwagon’ in times of uncertainty," Energy Policy, Elsevier, vol. 151(C).
    20. Polzin, Friedemann & Sanders, Mark, 2020. "How to finance the transition to low-carbon energy in Europe?," Energy Policy, Elsevier, vol. 147(C).

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:eee:enepol:v:87:y:2015:i:c:p:607-622. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Catherine Liu (email available below). General contact details of provider: http://www.elsevier.com/locate/enpol .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.