• Report introduces four-stage framework to help authorities attract investment.
• A place-based model could potentially halve costs of decarbonisation and generate significant socio-economic benefits.
• Estimates suggest savings of up to £137 billion in investment costs alongside savings of £431 billion in wider societal benefits such as better air quality.

Today, Energy Systems Catapult and Phoenix Group launch a new report, ‘Unlocking Regional Investment Through Local Area Energy Planning’, demonstrating that the UK’s transition to Net Zero requires a refreshed approach to financing local energy projects.

It is estimated that the UK will need investment of £26 billion per year into low carbon technologies and infrastructure through to 2050 to get to Net Zero¹. However, many local authorities are finding it challenging to secure funding, which has delayed some decarbonisation projects. The report finds that place-based financing, the key to delivering Net Zero at local level, is being limited by fragmented planning, higher borrowing costs in certain regions, and the need to strengthen investor confidence.

This report draws on previous research by the Catapult which indicates that while coordinated Local Area Energy Plans (LAEPs) could significantly reduce the overall cost of decarbonisation², many regions lack the financial tools to turn plans into action and can find it difficult to engage constructively with the investor community. Through LAEPs, local authorities can aggregate Net Zero transition projects to create scalability and streamline their costs and resources and more effectively communicate investment opportunities to investors.

Investors are cautious amid uncertainty about regional decarbonisation plans but want to work more closely with local authorities and present a clear, unified case for investment. A key barrier identified is the need to neutralise regional disparity in external financing costs which makes it harder for certain regions to attract the capital they need, reinforcing economic disparities.

To address these challenges, the report sets out a four-stage framework to help local authorities move from strategy to investment:

• Prioritising projects: Base project selection on robust Local Area Energy Planning, to ensure clarity on where and when funding is needed. Priority projects are defined as near-term interventions that can be promptly implemented to make progress towards Net Zero.
• Explore the range of financial options: Consider the range of finance available, from public investment to private capital and managed funds, guided by the level of investment required and the local authority’s available resources, expertise and statutory duties.
• Fostering strategic partnerships and engagement: Build engagement between local authorities, businesses, and financial institutions to secure long-term support.
• Developing clear investment prospectuses: Create detailed investment prospectuses that outline key financial metrics and broader community benefits, helping investors understand the scale and feasibility of the projects.

Tom Elliott, Senior Energy Transition Advisor – Place, Energy Systems Catapult, said:

“Local authorities are on the frontline of the UK’s Net Zero transition but delivering change requires the right investment. Too many projects are stuck on paper because funding mechanisms do not match local needs. We need to turn pounds into progress, ensuring that ambition is backed by finance, and that every community can share in the economic and social benefits of decarbonisation.”

The report highlights case studies from Greater Manchester and London, where local authorities have used structured energy planning to drive real investment. Greater Manchester’s LAEP identified a £64.4 billion investment need, with £6.3 billion of public funding expected to leverage £6.2 billion in private capital. London’s sub-regional energy planning has already led to a £53 million pipeline of projects ready for implementation.

A place-based model could potentially halve costs and generate significant socio-economic benefits – with estimates suggesting savings of up to £137 billion in investment costs alongside wider savings of £431 billion from factors such as energy savings and wider societal benefits such as better air quality³.

Tom continued:

“The message is clear: the UK’s Net Zero ambitions will not be met through fragmented, project-by-project funding. Without institutional investors contributing to place-based financing, critical decarbonisation projects risk being left behind – along with the communities that stand to benefit from them.”

Bruno Gardner, Head of Climate Change and Nature, Phoenix Group, said:

“As a large institutional investor, with circa £290 billion of assets under administration, Phoenix Group has the size to deliver investment at scale and we believe we can help catalyse growth at national, regional and local levels, which is key to accelerating progress toward Net Zero. We hope that our report will make it easier for local and regional authorities to secure much needed investment in their Net Zero transitions and look forward to working with them on this journey.

Notes 

1 Climate Change Committee’s Seventh Carbon Budget estimates that between 2025 and 2050, an average investment of £26 billion per year will be needed in the Balanced Pathway, peaking in the first half of the transition. Key areas for investment include expanding the electricity system to account for higher rates of electrification and improving buildings to install low-carbon heating systems.

2 Research by Energy Systems Catapult estimate that co-ordinated Local Area Energy Plans (LAEPs) are likely to deliver substantial whole system cost savings, in the order of 1% GDP, relative to an organic, unplanned approach. The total energy system discounted cost saving from this approach could total £252 billion between 2025 and 2050.

3 Innovate UK research demonstrates significantly better outcomes when places tailor their Net Zero delivery to the needs and opportunities of the area. adopting a place-specific approach (rather than a place-agnostic one) could generate greater benefits and lower costs. It would save £137 billion in investment cost and generate an additional £431 billion in energy savings and wider social benefits