With the staffing up of Great British Energy (GB Energy) underway, the centrepiece of the Labour Government’s Clean Energy Mission is now taking shape. While all of Whitehall waits for the outcome of Spending Review 2025, now is the time to consider how the Government actually supports the energy infrastructure needed to power homes, businesses and public spaces – and achieve its Clean Power 2030 goals.
Unlike other UK infrastructure sectors, such as schools, roads and hospitals, the Government doesn’t typically invest directly in energy assets, beyond specific areas such as nuclear. Since privatisation in the 1990s, the gas turbines, biomass, wind and solar assets used to generate electricity have all been privately owned; the same is true for the cables, wires and pipes that deliver this energy to where it is needed. In doing so, we have moved further than many other nations in the liberalisation of our energy system.
News stories and press releases point to GB Energy “investing” in electricity generation, and it recently announced the first such investment – putting rooftop solar panels on 200 schools and 200 hospitals – in March 2025. Yet below the headlines the detail is less clear. It seems more likely the funds will be grant support rather than actual equity investment made by GB Energy.
GB Energy is not the only energy financing vehicle available to the Government. The National Wealth Fund (NWF) was also created shortly after Kier Starmer came to power in 2024. The NWF has a head start on GB Energy, however: it was initially established by Rishi Sunak in 2021 as the Leeds-based UK Infrastructure Bank.
The NWF is making genuine equity investments, as well as providing other financing products. It has funded three direct equity investments during 2023/24, and a further public investment of £55 million into Connected Kerb, an EV charge point business, in early 2025 – this was with Aviva Investors, the asset management business of Aviva plc. It has also invested equity into 10 funds supporting a range of assets, from battery storage to broadband.
The NWF has not been without criticism . It was designed to make investments independent from the Government and operate at arm’s length from them. However, some industry analysts have been sceptical and suggest its investments amount to a form of state support – the NWF’s investment in Connected Kerb, for example, drew comments that the Government’s approach amounted to ‘picking winners’. Others point to the fact that the NWF has invested largely into managed funds, supporting a range of assets from battery storage to broadband. These equity funds provide a convenient way to claim taxpayer money has been put to work, since the funds are managed by established fund managers, such as, Octopus, Equitix and Gresham House. However, their economic additionality (ie, jobs created, gross value added) is debatable and there is no apparent shortage of private sector appetite for these funds.
For NWF or, in time, GB Energy, the key defence strategy is to co-invest to allay concerns that the state is ‘crowding out’ other investors and to promote its ability to act as an enabler in addition to participating as a financial investor.
If you ask financial investors about the role of government investment, most suggest that it should focus on high-risk, early-stage intervention. Yet such equity investment is a small component of overall government support to progress early-stage innovation in the energy space.
The Government supports innovation in energy, as it does in other sectors. However, virtually all funding for innovation is grant-based, not equity (or other forms of finance, such as loans) and at a sizeable scale. The Net Zero Innovation Portfolio (NZIP) in the last Spending Review totalled a substantial £1 billion budget from 2021-2025, for example.
The rationale for this approach is that early-stage technologies require government support but not dilutive equity investment, as this allows entrepreneurs to benefit from their own sweat equity. It also helps ensure the Government doesn’t crowd out the venture capital sector. In this way, the energy sector, and thus wider society, benefits from government assistance in the form of the innovation budget, but the Government itself doesn’t receive any upside when grant-recipient businesses grow in value.
It is challenging for the state to make venture capital type investments in the same way as private sector investors, who expect high returns for these risky endeavours, but examples do exist. When I led the corporate finance team in the Department for Business, Energy & Industrial Strategy (BEIS, now DESNZ), I helped the Government make a £20 million ‘pari passu’ investment into the Clean Growth Fund, creating a total of £40 million of investment to support early-stage companies in the clean energy and low carbon technologies sector. The fund then grew to £101 million at final close in March 2022. Once again, while this funding is likely still classed as equity investment by government, in substance this capital was managed at arm’s length by the fund manager, Clean Growth Investment Management LLP (CGIM). CGIM was selected via competitive tender to manage the fund, and it was an extremely competitive field from which to select a general partner. This marked a significant turnaround as previous attempts to generate interest from the fund manager community had been unsuccessful.
Elsewhere, only one significant transaction involving direct government equity stands out, though not the energy sector. The OneWeb equity investment in 2020 saw £400 million put into the satellite internet start-up. It has so far racked up significant accounting losses for UK taxpayers of close to £300 million – highlighting the broader risks.
Given the potential risks involved in equity investment, governance is critical. In this context, the role of UK Government Investments (UKGI) is to act as custodian to focus on ensuring value for money to the taxpayer from the investments made. Part of its role is to act as government shareholder on the boards of companies in which the Government has an equity interest: companies as diverse as Channel 4 and Ordnance Survey, and the National Wealth Fund (though notably not the Clean Growth fund).
UKGI also has responsibility for the ‘golden share’, a rare form of equity that grants the bearer special powers: in this context, ensuring the Government (through UKGI) can restrict the sale of certain businesses where there may be security or other policy implications. Once again, excluding nuclear, the Government doesn’t maintain golden shares in any energy businesses, since being forced to give these up by an EU court in 2008.
Equity investments are risky by definition, and difficult for the Government. The only significant energy sector examples reside within the new NWF, though these are dominated by investments into independently managed equity funds, not directly into companies or projects, raising questions of additionality.
Given the NWF is established and has a large budget, it’s unlikely that the new GB Energy will seek to create internal government competition by also making investments into the energy sector. To do so would risk wasting significant tax payer funding. It’s likely that GB Energy is almost certain to funnel any equity investments via the NWF, utilising its investment professionals and respected position in the market.
If this hypothesis is correct, and GB Energy doesn’t undertake direct investments into projects or companies itself, then its wider remit and reason for being may become unclear.
Ultimately, as the UK accelerates its clean energy transition, clarity on institutional roles will be critical. The NWF has taken the lead on equity-based interventions, while GB Energy’s mandate remains more ambiguous. The new GB Energy leadership must now move swiftly to define its role in our shared decarbonisation journey.
For more insight and guidance, contact Alasdair Grainger.
Sign up to get the latest role, industry or technical updates by email
