Following the 2025 World Economic Forum Annual Meeting in Davos, Switzerland, our CEO, Mark E. Rose caught up with Chris Wright, the UK Head of Sustainability and Decarbonisation. As energy continues to be a hot topic across the global CRE industry, Chris provided insight on what the future of energy means for the UK, and UK investors in particular.
MER: This year at Davos, the issue of energy security permeated across many of the sessions I attended. Given the ongoing geopolitical tensions impacting energy resources and the projected exponential growth in global energy demand, I would expect this issue to remain top of mind. How do you foresee this issue impacting energy availability in the UK and how should UK CRE occupiers, developers, and investors prepare for potential volatility in energy supply and costs?
- From a UK point of view, energy volatility has diminished a bit. The immediate demand has improved as we’ve just made it through winter. However, as we look further ahead to the 2030 clean energy plan and the mandate for Great British Energy, there will be a greater focus on energy security. To make the 95% clean power target feasible, we will need to bolster renewable supply to decrease the proportion of gas use. Energy security will be about how to lay down the renewables and the infrastructure needed for this to come to fruition. The more we secure our energy supply and improve our grid, the less we are exposed to geopolitical risk.
MER: In his speech, German Chancellor Scholz indicated that German investment into the future will require further investment into safe, affordable, clean energy and improved energy grids and heat networks. How do you see the UK government approaching similar challenges? What types of infrastructure investments will be most critical for supporting the CRE sector’s transition?
- It’s all about grid connection reform. Last year alone, NESO reported that there were roughly 1,700 grid connection applications submitted. The grid connection queue closed in January and will remain closed while NESO determines which projects in the existing pipeline are ready to connect. During this process, NESO will be prioritising projects that can be online in the next 5 years. Connections will no longer be awarded on a first-come, first-serve basis. Instead, the projects that are ready to meet the challenge to shift towards clean power, and provide the necessary infrastructure, will be prioritised. Once phantom projects are removed from the queue, we will have a new list of projects that are suited to lay down the infrastructure that we need for 2030 capacity.
- Once the application process is open again, renewable projects will excel. The UK still needs to double the energy capacity to decarbonise. While we’re waiting for grid reform to take place, the CRE industry needs to connect with Distribution Network Operators (DNOs) to discuss future development. If developers can approach DNOs with their proposals and provide their plans and projected energy demand, it will allow DNOs to look at their future plans from a more strategic point of view. Additionally, if developers have a project that is ready to go, they may look to bid to switch places with someone ahead in the queue in order to speed up the process.
- From a UK point of view, energy volatility has diminished a bit. The immediate demand has improved as we’ve just made it through winter. However, as we look further ahead to the 2030 clean energy plan and the mandate for Great British Energy, there will be a greater focus on energy security. To make the 95% clean power target feasible, we will need to bolster renewable supply to decrease the proportion of gas use. Energy security will be about how to lay down the renewables and the infrastructure needed for this to come to fruition. The more we secure our energy supply and improve our grid, the less we are exposed to geopolitical risk.
MER: In his speech, German Chancellor Scholz indicated that German investment into the future will require further investment into safe, affordable, clean energy and improved energy grids and heat networks. How do you see the UK government approaching similar challenges? What types of infrastructure investments will be most critical for supporting the CRE sector’s transition?
- It’s all about grid connection reform. Last year alone, NESO reported that there were roughly 1,700 grid connection applications submitted. The grid connection queue closed in January and will remain closed while NESO determines which projects in the existing pipeline are ready to connect. During this process, NESO will be prioritising projects that can be online in the next 5 years. Connections will no longer be awarded on a first-come, first-serve basis. Instead, the projects that are ready to meet the challenge to shift towards clean power, and provide the necessary infrastructure, will be prioritised. Once phantom projects are removed from the queue, we will have a new list of projects that are suited to lay down the infrastructure that we need for 2030 capacity.
- Once the application process is open again, renewable projects will excel. The UK still needs to double the energy capacity to decarbonise. While we’re waiting for grid reform to take place, the CRE industry needs to connect with Distribution Network Operators (DNOs) to discuss future development. If developers can approach DNOs with their proposals and provide their plans and projected energy demand, it will allow DNOs to look at their future plans from a more strategic point of view. Additionally, if developers have a project that is ready to go, they may look to bid to switch places with someone ahead in the queue in order to speed up the process.
MER: In my agenda blog, I highlighted the pressure to balance growing energy demand with sustainability goals. How do you expect investors in UK CRE to shift their capital allocation to address both decarbonization and energy security?
- We are seeing UK investors shift their focus to properties with an improved EPC rating. Investors are currently very focused on the target to reach a minimum EPC B. A quarter of UK commercial buildings are facing obsolescence by 2030 if Minimum Energy Efficiency Standards are not met. Beyond being a regulatory requirement, improved EPC ratings increase rental premiums.
- However, EPC targets are certainly not the only driver for investment into decarbonised assets and those with impressive sustainability accolades. Investing in properties with on-site generation and renewables drives improved returns for investors and lowers costs for occupiers. The industrial sector is increasingly looking to install solar PV because excess capacity can go back into the grid or battery storage. The UK Warehousing Association found that, with installation on just the largest 20% of UK warehouses, rooftop solar PV could double the UK’s generation capacity from 14 to 28GW. This will prove increasingly useful as occupiers seek to lower operational costs and spend little to none on energy.
MER: With energy resources becoming more constrained, do you foresee a shift in investment priorities toward buildings that can support on-site renewable generation? How should CRE investors assess and capitalize on these opportunities?
- Yes, I do. In fact, in the future, I believe that trading excess energy capacity will become more prevalent. While this is something that is already happening in several ways, these aren’t well-known or utilised. Over the years, we will see more accessibility to these processes. If this occurs, we’ll also likely see a proliferation of microgrids – a localized energy grid that can operate independently or alongside the main power grid. These grids can enhance energy resilience, improve reliability, integrate renewable resources and provide cost saving by reducing reliance on centralised grids. In a microgrid, renewable power generation at a single site could help supply assets across the same grid as energy flows between assets as needed, ensuring that energy is used in the right place, at the right time.
- We are seeing UK investors shift their focus to properties with an improved EPC rating. Investors are currently very focused on the target to reach a minimum EPC B. A quarter of UK commercial buildings are facing obsolescence by 2030 if Minimum Energy Efficiency Standards are not met. Beyond being a regulatory requirement, improved EPC ratings increase rental premiums.
- However, EPC targets are certainly not the only driver for investment into decarbonised assets and those with impressive sustainability accolades. Investing in properties with on-site generation and renewables drives improved returns for investors and lowers costs for occupiers. The industrial sector is increasingly looking to install solar PV because excess capacity can go back into the grid or battery storage. The UK Warehousing Association found that, with installation on just the largest 20% of UK warehouses, rooftop solar PV could double the UK’s generation capacity from 14 to 28GW. This will prove increasingly useful as occupiers seek to lower operational costs and spend little to none on energy.
MER: With energy resources becoming more constrained, do you foresee a shift in investment priorities toward buildings that can support on-site renewable generation? How should CRE investors assess and capitalize on these opportunities?
- Yes, I do. In fact, in the future, I believe that trading excess energy capacity will become more prevalent. While this is something that is already happening in several ways, these aren’t well-known or utilised. Over the years, we will see more accessibility to these processes. If this occurs, we’ll also likely see a proliferation of microgrids – a localized energy grid that can operate independently or alongside the main power grid. These grids can enhance energy resilience, improve reliability, integrate renewable resources and provide cost saving by reducing reliance on centralised grids. In a microgrid, renewable power generation at a single site could help supply assets across the same grid as energy flows between assets as needed, ensuring that energy is used in the right place, at the right time.
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