Covid-19 impacts on low-carbon investments

The Covid-19 pandemic has disrupted many sectors across the UK, and investment in low-carbon infrastructure has paused in many markets. Daniel Atzori, research partner at Cornwall Insight, comments on the likely impacts of the Covid-19 crisis in low-carbon infrastructure finance and investor confidence.

Despite the decrease in electricity prices due to a sharp drop in demand from industrial and commercial consumers, established energy infrastructure assets like wind and solar farms are expected to prove resilient in the current circumstances. In particular, owners and managers of operational renewable assets are likely to be relatively insulated from the downturn.

However, investors are set to examine more meticulously the risk profile and performance of less mature assets, such as battery storage, whose revenue streams are not yet seen as always predictable.

Corporate procurement of renewables from the top tier of companies – exemplified by global, financially robust tech firms – are expected to maintain their decarbonisation commitments, as the latter is based upon both ESG and economic drivers. However, smaller corporates may opt to postpone these decisions, given the uncertain macroeconomic landscape.

Overall, since infrastructure assets are typically included in packages of economic stimulus, renewables such as wind and solar are likely to keep on being perceived as relatively safe investment propositions. The case is even stronger now because achieving net zero emissions by 2050 is enshrined in law.

You can listen to Daniel Atzori discuss this issue further with Dan Wells, partner at Foresight, and Gareth Baker, partner at Gowling WLG in this podcast.