Investing in the Energy Transition: Insights from Dan Wells

Why grid infrastructure now matters more than renewable generation alone

The energy transition has reached a turning point. For years, the focus sat squarely on building more wind farms and solar arrays. That made sense when renewables needed to prove they could compete with fossil fuels. However, they won. Solar and wind are now cheaper than gas and coal in most markets.

The challenge has moved elsewhere. Dan Wells, a Partner at Foresight Group, argues that simply adding more renewable capacity misses the fundamental problem facing the UK and European energy systems. Electricity demand is rising fast, driven by transport electrification, heat pumps, and data centres. Meanwhile, the infrastructure needed to move that power from where it’s generated to where it’s used can’t keep up.

This creates a practical business problem for anyone investing in energy projects or relying on stable electricity supply. Renewable generation assets sit idle in connection queues for years. Manufacturers face uncertainty about future energy costs. Supply chains built around predictable grid access now encounter delays that affect project timelines and returns.

Wells manages the Foresight Energy Infrastructure Partnership, which has deployed billions into energy transition assets across Europe and beyond. His firm’s strategic shift tells you something important about where the sector is heading. Foresight now directs approximately 85% of its real assets investment toward what it calls system-level solutions rather than standalone generation projects.

What does that mean in practice? It means treating the electricity grid as a coordinated whole, not a collection of independent parts. Consequently, investment priorities are changing. Storage, transmission cables, and distribution networks now attract the same attention that solar farms received five years ago.

This article examines why that shift matters for UK businesses, particularly SMEs navigating net zero commitments, supply chain requirements, and the physical realities of an electricity system under strain.

The grid bottleneck slowing down renewable deployment

Connection queues have become the single biggest obstacle to new renewable capacity in the UK. Projects that received planning permission years ago still wait for grid access. In some regions, developers face connection dates pushed into the 2030s.

Wells describes the electricity grid as the primary bottleneck to decarbonisation. The problem isn’t theoretical. It affects project finance, return timelines, and the viability of investments that looked solid on paper. For businesses tendering for contracts that require renewable electricity procurement, these delays create real compliance risk.

The issue stems from infrastructure built for a different energy system. The UK grid was designed for large centralised power stations burning fossil fuels. Electricity flowed in one direction, from generator to consumer. Renewable generation works differently. Solar and wind capacity is distributed across thousands of sites. Power flows become bidirectional as local generation feeds back into the network.

Upgrading transmission and distribution infrastructure to handle this requires massive capital investment. National Grid estimates the UK needs to build as much network capacity in the next seven years as it built in the previous three decades. That’s not just new cables. It includes substations, transformers, control systems, and the digital infrastructure to manage variable supply.

Private finance could accelerate this, but regulatory structures make grid investment difficult for non-utility players. Most transmission and distribution assets in the UK are owned by regulated monopolies with strict return caps. Therefore, Foresight and similar infrastructure investors argue that governments should allow private capital into grid ownership under appropriate frameworks.

The European model offers some precedents. Interconnector cables linking national grids have attracted private investment through revenue-sharing agreements. Similarly, some countries allow independent developers to build and own grid-scale batteries that provide balancing services to system operators. These models could expand to cover broader transmission infrastructure if policy frameworks adapted.

For businesses, the grid bottleneck has immediate consequences. Manufacturers planning to install onsite solar face long connection waits. Companies procuring renewable electricity through corporate power purchase agreements encounter supply constraints. Even businesses simply trying to increase their electricity consumption for heat pumps or EV charging discover that local distribution networks lack spare capacity.

The scale of the problem became clearer in 2024 when National Grid published its connection queue data. Over 300 gigawatts of generation capacity sat waiting for grid access. That’s more than four times the UK’s current total installed capacity. Most of those projects will never get built, but even a fraction reaching completion would overwhelm current infrastructure.

This explains why Foresight’s second European energy infrastructure fund, currently raising capital toward a €1.25 billion target, allocates significant portions to transmission and distribution assets alongside generation. The firm sees grid infrastructure as essential to making existing renewable assets viable, not just a supporting element.

Storage requirements extend beyond lithium batteries

Renewable generation creates a different kind of grid management challenge. Gas plants can ramp up or down to match demand. Wind and solar cannot. Therefore, the system needs ways to store excess generation during high-output periods and release it when supply drops.

Battery storage has become the default answer, particularly for short-duration balancing. Lithium-ion batteries can respond in milliseconds, making them useful for frequency regulation and covering brief supply gaps. Costs have fallen dramatically, following the trajectory of electric vehicle battery development.

However, batteries alone won’t solve the storage requirement. Wells emphasises that viable energy systems need a mix of short-duration and long-duration storage technologies. Each serves different functions.

Short-duration storage, typically batteries with two to four hours of capacity, handles intraday fluctuations. This covers evening demand peaks when solar generation drops but electricity use rises. It also provides grid services like frequency response that help maintain system stability.

Long-duration storage addresses bigger gaps. What happens during windless winter weeks when demand peaks but renewable output falls? Batteries can’t economically store enough energy to cover multi-day or seasonal shortfalls. Other technologies fill this gap.

Pumped hydro storage has provided long-duration storage for decades. Water gets pumped uphill to a reservoir during periods of excess generation, then released through turbines when needed. The UK has limited suitable sites for new pumped hydro, but existing facilities play an important balancing role.

Green hydrogen offers another long-duration option. Excess renewable electricity splits water into hydrogen and oxygen through electrolysis. The hydrogen can be stored and later burned in gas turbines or used in fuel cells. This works for seasonal storage and provides a potential decarbonisation route for industrial processes that currently burn natural gas.

Nevertheless, hydrogen faces efficiency challenges. Converting electricity to hydrogen and back to electricity loses roughly 60-70% of the original energy. That makes hydrogen storage expensive unless electricity prices vary dramatically between storage and generation periods.

Other technologies complement these options. Compressed air energy storage pumps air into underground caverns, then releases it to drive turbines. Thermal storage heats material during off-peak periods and extracts the heat later. Demand-side response pays large electricity users to reduce consumption during peak periods, effectively creating virtual storage.

Foresight’s investment strategy reflects this technology mix. The firm’s portfolio includes battery projects alongside pumped hydro and early-stage hydrogen assets. In early 2026, Foresight acquired NZ Clean Energy and committed A$500 million to solar and battery projects in New Zealand, specifically targeting markets where storage economics work due to high renewable penetration and limited interconnection.

For UK businesses, storage affects electricity costs and supply reliability. More storage capacity should reduce price volatility as the grid can better match supply and demand. This matters for energy-intensive manufacturers whose costs swing with wholesale electricity prices. Additionally, businesses installing onsite solar increasingly pair it with batteries to maximise self-consumption and reduce grid dependence.

What this means for businesses managing energy costs and compliance

These infrastructure shifts create specific implications for UK SMEs, particularly those in manufacturing, logistics, and sectors with high energy consumption. Understanding the changing energy system helps businesses make better decisions about procurement, capital investment, and compliance.

First, electricity costs will likely remain volatile for the next decade despite falling renewable generation costs. The gap between cheap renewable electricity when the sun shines or wind blows and expensive electricity during calm winter evenings will probably widen. Businesses that can shift consumption to match renewable availability will see lower costs. Those with inflexible demand patterns may face higher bills.

Time-of-use tariffs will become more common. Already, commercial electricity contracts increasingly include pricing that varies by half-hour period. Smart businesses install systems to monitor real-time pricing and shift loads accordingly. This might mean running energy-intensive processes overnight or during weekends when renewable generation typically exceeds demand.

Second, grid connection constraints affect facility planning. Companies considering new sites or expansions should check local grid capacity early in the planning process. In some areas, securing a grid connection now takes longer than obtaining planning permission. This changes project timelines and might influence location decisions.

Third, supply chain pressure around renewable electricity procurement will intensify. Large corporate buyers have already soaked up much of the available renewable Power Purchase Agreement capacity. SMEs entering the market later may struggle to source renewable electricity at competitive prices. Government frameworks like Contracts for Difference help stabilise pricing for generators, but they don’t guarantee supply for buyers.

This affects tender responses, particularly for public sector contracts covered by Procurement Policy Note 06/21, which requires suppliers to publish carbon reduction plans and demonstrate net zero commitment. Businesses that secured renewable electricity deals early have a compliance advantage.

Fourth, onsite generation and storage become more attractive as grid constraints tighten. Solar panels paired with battery storage allow businesses to generate and store their own electricity, reducing grid dependence. Capital costs have fallen enough that payback periods now sit around 7-10 years for many commercial installations, even without subsidies.

However, planning rules and grid connection requirements still create barriers. Some businesses discover that exporting excess solar generation back to the grid requires costly connection upgrades. Others face planning restrictions on battery installations due to fire safety concerns.

Fifth, businesses with large electricity demand might consider participating in grid services markets. National Grid pays for flexibility services including frequency response, capacity markets, and demand-side response. Companies with flexible loads or backup generation can earn revenue by making capacity available to the grid operator.

This requires technical capability and market knowledge that many SMEs lack. Nevertheless, aggregators now bundle together smaller loads to participate in these markets. A manufacturer with 500kW of flexible demand might join an aggregator’s portfolio and receive a share of the revenue.

Finally, carbon reporting requirements increasingly scrutinise electricity procurement. Scope 2 emissions from purchased electricity represent a major portion of carbon footprints for many businesses. Simply buying standard grid electricity and applying average grid emission factors no longer satisfies scrutiny from investors, lenders, or large customers.

Demonstrating genuine renewable procurement requires either ownership of generation assets, long-term Power Purchase Agreements, or credible renewable electricity certificates. The market for these certificates has matured, but quality varies significantly. Some certificates represent genuine additionality while others simply rebadge existing renewable generation.

Five critical facts about energy infrastructure investment

Several key points emerge from Foresight Group’s strategic positioning and the broader infrastructure investment trends they represent. These facts help contextualise the shifts occurring in UK energy markets.

• Foresight Group manages £13.1 billion in assets under management as of 2026, with approximately 85% of new deployment directed toward energy transition infrastructure including generation, storage, and grid assets.
• The firm’s Foresight Solar Fund oversees roughly £1 billion deployed across 2 gigawatts of operational and under-development solar and battery projects in the UK and Europe, avoiding approximately 2.8 million tonnes of CO2 equivalent emissions annually compared to grid average electricity.
• Connection queue delays now represent the primary obstacle to new renewable capacity, with over 300 gigawatts of generation projects waiting for grid access in the UK alone, four times current total installed capacity.
• Energy storage requirements extend beyond short-duration batteries to include pumped hydro, green hydrogen, compressed air, and demand-side response, with different technologies serving distinct balancing needs across hourly, daily, and seasonal timeframes.
• Global energy-related greenhouse gas emissions likely peaked in 2026 according to infrastructure investors, marking a historic transition point where clean energy becomes the primary driver of electricity sector growth rather than fossil fuels.

Infrastructure investment priorities for the next phase of decarbonisation

The investment community’s strategic focus reveals where constraints and opportunities now sit within the energy transition. Foresight’s allocation of capital toward grid infrastructure and storage reflects a broader market recognition that generation capacity alone cannot deliver a functioning low-carbon electricity system.

This shift has practical implications for businesses planning their own decarbonisation. For years, advice centred on procurement: buy renewable electricity, install solar panels, switch to electric vehicles. That guidance remains valid, but it’s incomplete.

Businesses now need to think about their role within a more complex energy system. Can you offer flexibility to the grid? Does your site have land suitable for battery storage that could provide grid services while meeting your own needs? Are your electricity contracts structured to take advantage of price volatility rather than simply avoiding it?

Additionally, the infrastructure investment pipeline affects regional economic development. Areas with stronger grid infrastructure will attract energy-intensive industries and data centres. Regions with weaker grids face constraints on economic growth. Local authorities increasingly recognise this and prioritise grid upgrades in economic development strategies.

The policy environment needs to adapt faster. Current regulatory frameworks evolved for a different energy system and often slow down exactly the infrastructure investment that decarbonisation requires. Planning processes designed for fossil fuel power stations don’t fit distributed renewable generation. Grid connection queues operate on outdated principles that assume one large project per connection rather than coordinated deployment of multiple smaller assets.

Wells and other infrastructure investors argue that governments should streamline permitting, allow private finance into grid ownership, provide revenue certainty through mechanisms like Contracts for Difference, and support debt financing for higher-cost infrastructure. Some progress has occurred, but not at the pace required to meet 2030 and 2050 targets.

For SMEs, the message is clear: energy infrastructure constraints will affect your business whether you’re actively pursuing net zero or not. Electricity costs, supply reliability, and grid access all depend on infrastructure investment that’s currently lagging behind generation capacity growth.

Businesses that understand these dynamics can make better strategic decisions. Those that ignore infrastructure constraints may face unwelcome surprises when project timelines slip, connection costs escalate, or electricity price volatility squeezes margins.

The support available for carbon reporting and net zero planning now needs to incorporate infrastructure realities. A carbon reduction plan that assumes easy access to cheap renewable electricity may not survive contact with actual procurement markets. Similarly, facility expansion plans need grid capacity assessments built into early-stage feasibility work.

Where to find authoritative guidance on energy infrastructure

Several UK government and regulatory bodies provide detailed information on energy infrastructure development, grid connections, and electricity market reforms. These sources offer the technical detail and policy context needed to understand how infrastructure constraints affect business planning.

The Department for Energy Security and Net Zero publishes policy documents, consultations, and strategic frameworks covering the UK’s energy transition. Their publications include grid connection reform proposals and electricity market design updates.

National Grid ESO produces annual Future Energy Scenarios that model different pathways for UK electricity system development. These scenarios help businesses understand potential infrastructure buildout timelines and technology mixes under various policy and investment conditions.

Ofgem, the energy regulator, maintains detailed guidance on electricity connections, network charging, and flexibility markets. Their publications explain how businesses can participate in grid services and what connection costs to expect for different types of installations.

For businesses considering onsite generation or storage, the Renewable Energy Association provides technical resources and policy updates affecting distributed generation. Their guidance covers planning requirements, grid connection processes, and revenue opportunities from flexibility services.

Finally, businesses requiring support with energy procurement strategy, carbon reporting, or compliance requirements related to sustainability should seek specialist advice that accounts for current infrastructure constraints and realistic procurement timelines. The gap between policy ambition and infrastructure reality creates risks for businesses that plan based on what should be available rather than what actually is.

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