Jackdaw decision: new sovereign energy fund raises questions over market signals

A new sovereign investment vehicle, the Energy Wealth Fund, will redirect North Sea oil and gas tax revenues into clean energy investments, UK chancellor John Healey announced today.

The announcement came alongside the government’s approval for the Jackdaw gas field to begin operations in the North Sea, in a bid to appeal to concerns about government backing for a new gas project.

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The government has said it will inject £2bn in initial funding into the vehicle, using tax revenues from North Sea oil and gas to invest in renewable and low carbon energy projects and support the green transition. 

"This investment in renewable energy will substantially delink gas and electricity by the end of this Parliament. By investing in and building more renewable and low carbon power, gas will set the price of electricity less often, helping end Britain’s exposure to volatile international gas markets and help get bills down for good in the long term" the government said in a statement announcing the new fund. 

“Recent events in the Middle East have triggered global energy shocks and pushed up bills for families across the country. At a time of global instability, homegrown energy can be a source of national strength”, the statement reads.

The new fund will sit alongside other public finance bodies such as the National Wealth Fund and Great British Energy and the Great British Grid which were launched by the Labour government since taking office in 2024. 

Investment implications

While further details of the fund’s structure are awaited, chancellor Healey says the fund is aimed at building energy security. “Through our new Energy Wealth Fund, we will invest in the clean energy industries of the future, creating jobs, driving growth and strengthening Britain’s energy security”, he commented.

Prime minister Andy Burnham has said the decisions reflect a ‘pragmatic approach’ to North Sea energy sources. “We’re also establishing a new Energy Wealth Fund to invest in renewable energy, support the green transition and help reduce energy bills over the long term”, he explained.

RenewableUK, a trade association, says the fund is ‘potentially important’. “The Government’s announcement of a new Energy Wealth Fund is potentially an important part of the energy transition, and we look forward to seeing the detail”, says Tara Singh, RenewableUK’s CEO.

The UK’s Sustainable Investment and Finance Association (UKSIF) is awaiting details too. A spokesperson for UKSIF told Net Zero Investor that the group is holding back on a response to the fund while clarity is awaited.

Investment implications

The new fund and the Jackdaw decision have implications for investors backing the country’s energy transition. In a statement, the government said it expects the gas field to contribute to energy security by increasing domestic gas production by up to 6%.Infrastructure investors, for example, have historically asked for regulatory stability given the long-term horizons of their investments.

“Policy stability is clearly an important consideration for any long-term infrastructure investor, particularly where projects depend on regulation, market design or government-supported mechanisms”, Charlie Wright, investment director at Foresight Environmental Infrastructure (FGEN), told Net Zero Investor.

UKSIF chief executive James Alexander raised similar concerns, noting that the decision raises questions over the government’s signal to markets.

“The government must make clear to markets that this is the final chapter for North Sea drilling, not a signal that our energy transition is slowing”, he warned.

Octopus Energy group chief executive Greg Jackson says the government’s claims that the Jackdaw decision promotes energy security and lower prices warrant scrutiny.

“It [Jackdaw] won’t bring prices down or provide much insulation against geopolitics and dictators, which is why we need to speed up the adoption of heat pumps”, Jackson commented, while noting that the decision itself was ‘good energy policy’ from a perspective of reducing import dependence. 

RenewableUK’s Singh agrees that price effects for consumers needed additional context. “Oil and gas are traded on global markets, so developments like this, whilst supporting jobs and revenues, will not shield consumers from volatile prices”, she explained.