Scaling up investment in Smart Local Energy Systems

Published: 9 February 2021

By Dr Anna Stegman, Energy Revolution Integration Service, Technical Liaison Manager

One of the key global investment trends identified in a recent publication by BloombergNEF has been the record growth of sustainable finance. Covid-19 has influenced this market as there is a clear drive to build back greener and fairer to support economic recovery.  

Figure 1: Global sustainable debt annual issuance, 2013-2020.

  • Social bonds: raise money for social objectives such as employment, public health and education 
  • Green bonds: raise money to support environmental activities 

This means there are new and exciting opportunities for investment in low carbon technology and energy systems. The Prime Minister’s 10-Point Plan for a Green Industrial Revolution has committed £12bn of government investment into low carbon technology and the recent announcement of a national infrastructure bank with a net zero remit shows that the UK is ready to accelerate investment and growth in this sector. The development of new frameworks for sustainable finance strategies from the private sector reflects the trend in promoting investment in the low carbon sector. 

Smart Local Energy Systems (SLES) are one of the exciting opportunities that can benefit from this new investment environment. SLES are a relatively new approach to accelerating the deployment of decentralised low carbon energy technologies by developing innovative business modelsSLES differ from the current approach to local energy projects by taking a whole energy system view, including the generation, distribution, management and demand of different energy vectors. SLES are predominately focused on using digital technology to improve the control of energy supply and demand, and thereby offering greater flexibility and utilisation of both existing infrastructure and new technology. These systems are then able to offeimproved services and outcomes to end-users, such as:  

  • more affordable low carbon technology; 
  • heating systems that offer greater comfort;  
  • transport options for greater mobility;  
  • designed to ensure a fairer system. 

 

 Figure 2: What makes up a Smart Local Energy System?

SLES are designed based on the needs of the community and existing assets within a local area, with significant involvement from the Local Authority, and so they provide greater potential for improving environmental and social issues such as air qualityfuel poverty and digital connectivity.  

The Prospering from the Energy Revolution (PFER) programme is a £102.5m UK government-funded 4-year programme to demonstrate the feasibility and additional value that can be achieved through taking a local approach to achieving net zero.  This programme comprises three demonstrator and 10 detailed design projects with a broad range of organisations forming consortiums which include network companies, local authorities, technology developers, community groups, specialist consultants and academia where each considers a different local area in the UK 

Several organisations that have been supported as part of the programme have since received significant investment – a selection of published examples includes: 

These organisations are leading in different elements of SLES and there is clearly a range of investors identifying value is the low carbon market.

The local authorities involved in these PFER projects are also considered leaders in delivering upon their local net zero targetsA mix of strong political backing, internal skills and resources, translates into an ability to deliver innovation projects and to effectively deploy the available funding. All these factors have been key drivers to help establish these projects.  However, to ensure the UK as a whole can meet the net zero targets by 2050, significant scaling ineeded across many areas including investment, skills, and the supply chain 

With the increase in social and sustainably targeted bonds, there is an opportunity for local authorities to unlock further private funding that aligns with their priorities and ambitions, to help accelerate the development of low carbon projects, as well as the organisations that are developing Smart Local Energy Systems.   

To support, Energy Systems Catapult are developing a toolkit to help Local Authorities to understand the finance options available and how novel business models could work for them to encourage further investment into this sector 

We will be publishing an insight paper next month to ensure the toolkit also meets the needs of the investment community and to raise awareness of potential opportunities within Smart Local Energy Systems. 

To find out more – please register HERE to sign up to our newsletter and receive the insight paper and register your interest HERE to join our user testing group for the toolkit. If you would like to get in touch, please contact Anna Stegman.