Britain on Wednesday offered about $2 billion to lure new investment in offshore wind and clean energy.
Ministers hope the record sum will “attract cutting-edge clean technologies to Britain” in an auction of renewable energy contracts this summer.
Investors failed to put in a single bid for offshore wind projects in the last auction last year, damaging the UK's clean energy plans.
The pot available for offshore wind has been increased to £1.1 billion ($1.41 billion) as the new Labour government makes home-grown energy a flagship policy.
“Last year’s auction round was a catastrophe, with zero offshore wind secured, and delaying our move away from expensive fossil fuels to energy independence,” Energy Secretary Ed Miliband said.
“Instead, we are backing industry to build in Britain, with this year’s auction getting its biggest budget yet,” he said.
The total auction budget of £1.5 billion ($1.92 billion) is about 50 per cent larger than the amount proposed by the previous Conservative government.
It includes funding for solar farms, tidal power and onshore wind, for which building rules have been relaxed by Mr Miliband.
Bidders who win a clean energy project are given a guaranteed electricity price, with consumers making up the difference if necessary or reimbursed if costs are higher.
Britain is looking to the private sector to help fund its clean power push even as a new state-owned company, Great British Energy, provides some investment.
Owners of operational wind farms in Britain include the UAE's Masdar, Denmark's Orsted and Germany's RWE.
Sticking plaster
Jonny Marshall, an economist at the Resolution Foundation think tank, said the higher budget was a “necessary sticking plaster” after last year's failure.
He said costs were rising for developers due to high interest rates and supply chain problems, even as the technology improves.
Last week, Labour announced plans to build more wind turbines on the seabed owned by King Charles III as it aims for a clean power grid by 2030.
Making Britain a 'clean energy superpower' is one of what Prime Minister Keir Starmer calls his five 'missions' in government.
To meet this goal, the “vast majority” of new offshore wind will have to be agreed in this year's and next year's auctions, Energy UK chief executive Emma Pinchbeck said.
“That remains a huge challenge but [the higher budget] is certainly a big step in the right direction and another welcome demonstration of the government’s ambitions,” she said.
Annual figures released on Tuesday showed a record 46.4 per cent of Britain's electricity came from renewable sources in 2023.
Wind turbines provided 28.1 per cent, also a record, while coal fell to a new low of 1.3 per cent, with only one coal-fired power station remaining operational.
However, the UK returned to being a net electricity importer after an unusual year in 2022 in which France had to buy electricity from Britain due to problems with its nuclear reactors.
Britain's nuclear reactor fleet suffered issues last year, contributing to a drop in generation after two plants closed in 2022.
A separate set of figures showed the EU's wind and solar production overtaking fossil fuel generation for the first time, in the first half of 2024.
Fossil fuels generated 17 per cent less than in the same period last year, even as demand rebounded, according to energy think tank Ember.
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Mercer, the investment consulting arm of US services company Marsh & McLennan, expects its wealth division to at least double its assets under management (AUM) in the Middle East as wealth in the region continues to grow despite economic headwinds, a company official said.
Mercer Wealth, which globally has $160 billion in AUM, plans to boost its AUM in the region to $2-$3bn in the next 2-3 years from the present $1bn, said Yasir AbuShaban, a Dubai-based principal with Mercer Wealth.
“Within the next two to three years, we are looking at reaching $2 to $3 billion as a conservative estimate and we do see an opportunity to do so,” said Mr AbuShaban.
Mercer does not directly make investments, but allocates clients’ money they have discretion to, to professional asset managers. They also provide advice to clients.
“We have buying power. We can negotiate on their (client’s) behalf with asset managers to provide them lower fees than they otherwise would have to get on their own,” he added.
Mercer Wealth’s clients include sovereign wealth funds, family offices, and insurance companies among others.
From its office in Dubai, Mercer also looks after Africa, India and Turkey, where they also see opportunity for growth.
Wealth creation in Middle East and Africa (MEA) grew 8.5 per cent to $8.1 trillion last year from $7.5tn in 2015, higher than last year’s global average of 6 per cent and the second-highest growth in a region after Asia-Pacific which grew 9.9 per cent, according to consultancy Boston Consulting Group (BCG). In the region, where wealth grew just 1.9 per cent in 2015 compared with 2014, a pickup in oil prices has helped in wealth generation.
BCG is forecasting MEA wealth will rise to $12tn by 2021, growing at an annual average of 8 per cent.
Drivers of wealth generation in the region will be split evenly between new wealth creation and growth of performance of existing assets, according to BCG.
Another general trend in the region is clients’ looking for a comprehensive approach to investing, according to Mr AbuShaban.
“Institutional investors or some of the families are seeing a slowdown in the available capital they have to invest and in that sense they are looking at optimizing the way they manage their portfolios and making sure they are not investing haphazardly and different parts of their investment are working together,” said Mr AbuShaban.
Some clients also have a higher appetite for risk, given the low interest-rate environment that does not provide enough yield for some institutional investors. These clients are keen to invest in illiquid assets, such as private equity and infrastructure.
“What we have seen is a desire for higher returns in what has been a low-return environment specifically in various fixed income or bonds,” he said.
“In this environment, we have seen a de facto increase in the risk that clients are taking in things like illiquid investments, private equity investments, infrastructure and private debt, those kind of investments were higher illiquidity results in incrementally higher returns.”
The Abu Dhabi Investment Authority, one of the largest sovereign wealth funds, said in its 2016 report that has gradually increased its exposure in direct private equity and private credit transactions, mainly in Asian markets and especially in China and India. The authority’s private equity department focused on structured equities owing to “their defensive characteristics.”
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