The UK will need at least £511 billion of investment by 2040 to deliver the infrastructure required for its clean energy transition and support the wider shift to net zero, according to new analysis by Santander UK and Standard Life.

The investment would be equivalent to around £40 billion a year on average and would span renewable generation, electricity networks, energy storage and emerging low-carbon technologies. The report, Unlocking investment to finance the UK’s energy transition, describes the programme as one of the largest infrastructure investment efforts required in the UK for decades.

The analysis finds that the UK already has significant capital available to support the transition, but argues that the challenge is ensuring it can be deployed efficiently as financing needs grow and traditional financing structures face increasing pressure.

Five measures to mobilise investment

According to the report, one of the barriers is a mismatch between the characteristics of many clean energy infrastructure projects and the requirements of institutional investors.

To address this, the analysis identifies five practical solutions: credit enhancement guarantees, blended finance, aggregation, standardisation, and greater collaboration between banks, institutional investors, project developers and public finance institutions.

The report estimates that greater participation by institutional investors and closer collaboration across the financing system could unlock around £120 billion in clean energy financing opportunities. It also identifies approximately £137 billion in potential bank capital recycling opportunities and around £3 billion in financing savings.

The additional capital could support investment in renewable generation, electricity networks, energy storage and emerging clean technologies, which the report says are needed to strengthen the UK's energy security.

Banks and institutional investors as complementary sources of capital

Benedict Smith, Head of Specialised & Project Finance at Santander, said collaboration between banks, insurers, institutional investors, other financial institutions, developers and government would be essential for the UK to meet its clean energy goals.

“The challenge going forward is not just in raising more capital, but in creating more efficient, productive mechanisms for the allocation of this capital across the financing ecosystem, and aligning it effectively with project risk,” Smith said.

The report argues that banks and institutional investors should be viewed as complementary rather than competing sources of capital. Banks have a role in financing construction and managing complex risks, while long-term investors such as insurers can participate selectively during construction when risks are understood, appropriately allocated and supported by suitable contractual protections.

Institutional investors are also positioned to provide long-term capital once projects become operational and generate more predictable cash flows.

Focus on project structures and risk allocation

The analysis says projects will need investable structures with an appropriate balance of risk and return to mobilise capital at scale. It also points to greater standardisation, aggregation and targeted public-sector risk sharing as measures that could broaden access to long-term capital.

The report argues that this approach could provide institutional investors with access to long-term opportunities while offering returns for retirement savers.

According to the analysis, improving how capital is mobilised and infrastructure is financed could help accelerate project delivery while supporting the UK's energy security, economic resilience and long-term growth.