Nest explores renewable energy with Octopus Energy Generation

Investments are prioritised based on building a diversified portfolio to mitigate risks and ensure strong returns. The team looks for the best relative return opportunities across different technologies and markets.

Political changes can influence investment directions. For example, the new Labour government in the UK has set ambitious green growth targets, attracting international investors. In the US, despite potential policy shifts under President Trump, investors continue to see strong returns in the energy transition sector.

Achieving the UK’s targets for green electricity generation by 2030 is ambitious but possible. Key challenges include speeding up planning permissions, grid connections, and raising the necessary funds.

Addressing grid intermittency involves leveraging electric vehicles for storage and considering long-duration storage solutions for periods of low wind. While nuclear power is part of the current energy mix, the focus is on achieving cheaper solutions with wind and solar. Advances in nuclear technology, such as fusion, are being monitored.

Currently, there are no immediate plans to invest in China due to the complexity of the market. However, understanding the Chinese supply chain is crucial, especially for solar and battery storage. The recent meeting between Prime Minister Starmer and the Chinese President is noted, but no specific impact on investment plans was mentioned.

In the UK, gas is used for electricity production, heating, and in industries like manufacturing. To reduce reliance on gas, Octopus Energy Generation’s is focusing on:

1. Building wind and solar farms to replace gas in electricity generation.
2. Installing electric heat pumps for homes and businesses instead of gas boilers.
3. Producing hydrogen from renewable electricity for industrial use.

The Sky fund is actively supporting all these initiatives.

The Sky fund has a clear objective to promote a "just transition" by ensuring the benefits of the energy transition are distributed more equally. This commitment underpins Sky’s approach to addressing the "S" in ESG with tangible social benefits delivered through investments like Kensa and Deep Green:

• Kensa ground-source heat pumps: Reduced energy costs in social housing by up to 66%, increasing residents' weekly disposable income by 40% and providing affordable warmth
• Deep Green's innovation: Captures waste heat from data centres to warm public swimming pools, cutting gas use by 62% and reducing carbon emissions by 26 tonnes annually

Sky’s broader social commitments across its renewable energy assets include implementing community benefit funds, maintaining high health and safety standards, conducting human rights due diligence and promoting diversity and inclusion across its supply chain and creating jobs—particularly for local communities.

These investments demonstrate that innovative energy solutions and renewable energy assets can drive social equity, improve living standards, and build resilient communities.