Financing UK place-based climate action: from Westminster to Cumberland

This report explores the barriers and opportunities associated with scaling up net zero investment at the local authority level in the UK. By examining the experiences of two contrasting but ambitious councils, Westminster City Council and Cumberland Council, it aims to identify context-specific opportunities for local net zero projects and how to advance investment readiness, and assesses the enabling policy environment at the two councils. In so doing, it provides insights for those and other local authorities seeking to accelerate their transition to net zero. The project draws on workshops held with investors and council stakeholders, plus analysis from Energy Systems Catapult and the University of Edinburgh.

An 8-page summary policy brief is also available.

Key messages

• The UK’s transition to net zero requires unprecedented investment around the country, with some £550 billion needed by 2050 for local net zero projects, including in local renewable energy generation, energy storage, heat pumps, heat networks, energy efficiency retrofits, alternative fuel production and clean transport.
• This investment is not yet flowing at the scale needed; well-documented barriers include the small size of individual projects, a lack of local project development capacity, revenue uncertainty in key areas requiring major investment, historically uncertain government policy, and limited engagement by larger institutional investors.
• To ensure a just transition, investment in decarbonisation must be undertaken in a way that is fair to and inclusive of communities, workers and local supply chains. This project therefore aimed to identify not only technology solutions, but also just transition opportunities such as the creation of good jobs, community participation and regional equality.
• The business models explored ranged from renewable energy power purchase agreements to electric vehicle charge point concessions. The project identified two specific potential proposals for further development: a pay‑as-you-save building retrofit model supporting heritage retrofit skills development (for Westminster); and community energy co-investment for larger projects (for Cumberland). These could have an impact at scale and be further applied or tailored to other places.
• The business model and innovation analysis also revealed a range of possible place-specific opportunities for each locality. The direct and indirect gross value added (GVA) resulting from the interventions could amount to £1.3 billion for Westminster, with co-benefits valued at £171 million, and £25.6 billion for Cumberland, with co-benefits of £1.01 billion, between 2025 and 2050.
• To meet their net zero plans, local authorities will need to work with funding providers across a wide spectrum of public and private capital.
• Investors are showing broad interest in place-based projects and are significantly more likely to invest if councils can demonstrate strong ambition, a vision and a track record of delivery. Government can play a key enabling role in this by providing support to local places.

Summary recommendations

The project’s broader recommendations are as follows:

• Councils should pursue a parallel programme of council and opportunity investment readiness. To stand the best chance of attracting investment, they should prioritise Local Area Energy Plans or equivalent technical feasibility analysis, supported by business model and initial commercial feasibility analysis.
• Government should provide greater and more consistent long-term funding to local authorities for net zero delivery. GB Energy and the National Wealth Fund should enable the Government to partner with councils to undertake early development activity for projects of scale that can crowd in private investment later.
• Investors and advisors should continue market engagement, in partnership with councils, on financing models for retrofit and community energy, targeting institutional-scale financing in the coming years. Investors should further continue to pursue more place-based mandates.