Managing a listed renewables investment company means spending time thinking about what drives value in clean energy. Five years ago, the answer was building as many wind and solar farms as quickly as possible. Today, much of the value lies somewhere less visible: the grid infrastructure that connects them to industrial and domestic demand.
Britain doesn't have a shortage of renewable energy projects waiting to be built. It has a shortage of ways to plug them in. Before connection reform in 2025, the queue to join the grid had swollen to more than 700GW – four times what the system needs for 2030.
Ready-to-build projects can wait years for a connection date, and existing wind farms are regularly switched off because the network can't carry their power. Grid reform has since cut the queue, prioritising projects that are ready and needed, but getting sufficient grid infrastructure built to connect new generation remains a huge undertaking.
Every delayed connection and every unnecessary outage adds cost to the system, and those costs end up on household and business bills. With the conflicts in Ukraine and the Middle East pushing energy security and affordability back to the top of the agenda, that is a cost Britain can ill afford.
Seeing this bottleneck correctly identified in Andy Burnham’s speech at the Labour Party conference was positive, as he announced plans to launch Great British Grid (GB Grid), which will invest in electricity network infrastructure alongside private capital to accelerate grid connection.
But it isn't a lack of capital holding grid investment back. Network companies have raised substantial sums in recent years and investor appetite for well-structured UK infrastructure remains strong. What is scarce is the skilled workforce to design, build and commission new grid capacity, and to keep the existing network running efficiently.
Commissioning engineers, for example, are in short supply, contributing to delays in bringing new projects online. At the same time, the work required to reinforce and upgrade the grid can mean existing wind and solar assets are taken offline, reducing the amount of electricity they can export.
GB Grid should therefore be judged on whether it can improve delivery on the ground, reduce grid downtime and get projects connected faster. That means building workforce capacity and providing the policy consistency that long-term investors need.
However, building more grid infrastructure is only part of the answer. We also need a strategy to get more from the system we have. Investors in renewables infrastructure can benefit from this today and there are three areas that stand out.
The first of these is storage, which can turn grid constraints into flexibility. Renewable generators produce electricity according to the weather, while the network and electricity demand cannot always accommodate that power at exactly the same time.
Adding new batteries to the grid is one of the quickest ways to get more from existing capacity due to their ability to soak up renewable power when the network is congested and release it when it's needed, reducing the amount of wind and solar that has to be switched off.
Second is repowering. Replacing older turbines with larger, more efficient models on existing sites can often double output, whilst using the grid connection that's in place today. Repowering therefore offers the potential to extend the productive life of an existing asset and increase what that site can contribute without starting again from scratch.
Third, co-location can make existing grid connections more productive. Adding batteries to existing wind and solar sites uses connections already in place to shift output from when the wind blows and the sun shines to when demand and prices are highest. If Britain can make better use of connections that have already been built, more value can potentially be generated from existing infrastructure while wider grid expansion continues.
In a market where new connections are slow to secure, operational grid-connected assets are becoming even more valuable. A connection secured years ago, with long-term revenues already contracted, is something a new entrant cannot easily replicate. Those assets provide the platform for the next wave of value creation: adding storage, repowering ageing turbines and extending operating lives, all without joining the back of the queue.
This creates an interesting disconnect. While much of the listed renewables infrastructure sector continues to trade at a wide discount to net asset value, the strategic importance of operational, grid-connected assets has arguably increased. Energy infrastructure has, if anything, become more important as grid capacity has become scarcer.
As many of these portfolios continue to produce stable, inflation-linked revenues, for long-term investors the gap between market valuation and underlying strategic value is worth paying attention to.
GB Grid is a step in the right direction and, if successful, will open up even greater opportunities for investors. Whether it succeeds will come down to execution: people on the ground, fewer outages, connection dates that are met and rules that remain stable. Get that right, and Britain could lower bills, strengthen energy security and attract the capital needed to deliver both.
In the meantime, while the grid catches up, the greatest value for investors lies in the assets that are already plugged in and generating.
Minesh Shah is managing director for The Renewables Infrastructure Group. The views expressed above should not be taken as investment advice.