Powering up Britain and mobilising green investment

This challenge was judged by the High Court to be partially successful and the court determined that the proposals and policies the government had prepared and laid before Parliament were inadequate.

Further to this judgment, in 2022, the Climate Change Committee’s annual report concluded that it was highly unlikely that the UK will achieve net zero by 2050.

In March 2023, the newly formed Department for Energy Security and Net Zero (DESNZ) published Powering up Britain: Net Zero Growth Plan (NZG Plan) alongside Powering Up Britain: Energy Security Plan.

The NZG Plan, together with the Energy Security Plan, set out how the government aims to enhance the UK’s energy security, seize the economic opportunities of the low carbon transition, and deliver on the government’s 2050 net zero commitment.

The NZG Plan:

• Responds to the expert recommendations of the Independent Review of Net Zero, chaired by Chris Skidmore MP and published in January 2023. DESNZ also published a detailed government response to the review alongside the NZG Plan.
• Sets out in detail the actions the government will take to ensure the UK remains a leader in the net zero transition, by driving investment into key green industries like offshore wind, carbon capture, use and storage (CCUS) and nuclear.
• Considers the importance of green finance and investment.

Reducing Emissions Across the Economy

The NZG Plan focuses on the following sectors:

Power

• Raising ambitions on renewables and securing record capacity by:
  • Accelerating the Contracts for Difference scheme – Round 5 in March 2023.
  • Launching the Floating Offshore Wind Manufacturing Investment Scheme – providing up to £160 million to kick start investment in port infrastructure projects. The application window opened on 30^th March 2023 and closes on 25^th June 2023. Applicants will have to go through a seven-step process, including review by the Industrial Development Advisory Board, before the Secretary of State Determination will take place in Autumn 2023.
• Setting a new aim to deliver 24GW nuclear capacity by 2050 by:
  • Committing to provide up to £1.7 billion of direct government funding to enable one nuclear project to Final Investment Decision in next Parliament. As part of this £1.7 billion, the government has invested approximately £700 million to take a 50% stake in Sizewell C, a project for the construction of a nuclear power station in Suffolk.
  • Announcing the launch of Great British Nuclear.
• Progressing commitment to deliver at least one power CCUS (Carbon Capture Utilisation and Storage) plant by the mid-2020s by:
  • Beginning negotiations with Net Zero Teesside Power which could become the UK’s first ever power CCUS project.
  • Passing legislation for the Dispatchable Power Agreement providing the basis for negotiations with power CCUS projects.
• Setting an ambition to halve the time it takes to build a new transmission network infrastructure and beginning the transition to a strategically designed network. Nick Winser was appointed as Networks commissioner in 2022 and will publish an action plan in late 2023 with recommendations.

Fuel Supply and Hydrogen

• Raising and beginning to deliver on its 10 GW hydrogen production capacity ambition by:
  • Launching the £240 million Net Zero Hydrogen Fund (NZHF) in April 2022 and the first electrolytic hydrogen allocation round in July 2022.
  • Publishing a list of 20 projects for the first electrolytic hydrogen allocation round.
• Developing hydrogen transport and storage, end use, and investment opportunities by:
  • Extending the Industrial Energy Transformation Fund (IETF) to strategically support investments by early movers in industry. The IETF supports the development and deployment of technologies that enable businesses with high energy use to transition to a low carbon future. The fund is managed by DESZ and is currently assessing phase 2 applications for a £200 million funding round.
  • Publishing the Hydrogen Investor Roadmap and Hydrogen Sector Development Action Plan summarising government policy and funding.
• Progressing measures to reduce greenhouse gas (GHG) emissions from oil and gas by:
  • Establishing the Government and Regulators Electrification Group (GREG).
  • Launching the Climate Compatibility Checkpoint.

Industry

• Including clauses in Energy Bill, currently in the third reading in the House of Lords and likely to be introduced in late 2023/early 2024, to strengthen Energy Savings Opportunity Scheme to reduce UK’s final energy consumption from buildings and industry by 15% by 2030.
• Extension of Energy Intensive Industries Exemption (EII) Scheme.

Heat and Buildings

• Setting higher energy efficiency standards for new homes including consulting on its revised Future Homes Standard.
• Sets out update on delivery milestone for The Great British Insulation Scheme (formally ECO+) – delivering £1 billion additional investment by March 2026.

Transport

• Phasing out sale of all types of new non-zero emission road vehicles (ZEV) by 2035:
  • Launching final consultation on the ZEV mandate regulations, to apply from 2024. These will require, from 1 January 2024, an increasing percentage of a manufacturer’s annual new car and van sales in the UK to be zero emission until reaching 100% in 2035.
• Supporting development of charging infrastructure network by:
  • Further £343 capital and £37.8 resource funding to scale up the delivery of local charge points across England through the Local EV Infrastructure (LEVI) Fund.
• Increasing levels of cycling and walking by:
  • Launching a new executive agency, Active Travel England to ensure local authorities invest in effective, high-qualify schemes.
• Accelerate aviation and maritime decarbonisation.

Natural Resources

• Protecting natural resources, including the Environmental Improvement Plan and update on Environmental Land Management.
• Agriculture:
  • Announcing six new Sustainable Farming Incentive standards.
  • Opened the £270 million Farming Innovation Programme to facilitate the development and adoption of emerging farming technologies.
• Forestry:
  • Announcing £124 million boost for the Nature for Climate Fund – ensuring a total spend of £678 million on woodland creation and woodland management by 2025.

Supporting the Transition Across the Economy

The NZG Plan also includes details as to how the government will support the transition across the economy including (but not limited to) the following sections:

Innovation

• Increasing government investment in R&D – £20 billion per year public R&D budget by 2024/5 including additional £1.6 billion for the UK’s nine Catapults for 2023-2028.
• Publishing UK’s first Net Zero Research & Innovation Framework and Net Zero Research and Innovation Delivery Plan to outline the Government’s net zero R&D programmes for the current Spending Review period 2022-25.
• Delivering government programme of innovation to enable decarbonisation by:
  • Investing £4.2 billion in net zero research and innovation from 2022-25.
  • The £1 billion Net Zero Innovation Portfolio (NZIP) and £385 million Advanced Nuclear Fund.
• Taking a leadership role in Mission Innovation 2.0 – the leading forum for international clean energy innovation and global collaboration.

Green Finance and Investment

• Financing Green by:
  • UK Infrastructure Bank – now operational and has announced 12 deals investing £1.2 billion and unlocking over £5 billion of private capital.
  • Extending the UK’s green gilts programme.
  • Publishing four investor roadmaps covering the UK’s automotive, hydrogen, CCUS, and offshore wind sectors.
• Greening Financing by:
  • Requiring largest businesses and financial institutions to disclose their climate-related risks and opportunities through Sustainability Disclosure Requirements

Net Zero Workforce

• The Green Jobs Delivery Group – following initial investigations into current workforce challenges, four task & finish groups have been established:
  • The Power and Networks Group – tackling workforce issues facing power sector.
  • The Nature Skills Group – developing a set of actions to create nature-based jobs.
  • The Local Capacity Group – bringing together leaders, business communities, skills providers, and government to explore local challenges and opportunities.
  • The Resources and Waste Group – gathering information on skills needed to deliver the Resources and Waste Strategy.
• Upskilling the workforce for the green economy.
• Supporting individuals into green jobs.

Embedding net zero in government

• Through the creation, in February 2023, of the Department for Energy Security and Net Zero.

Local net zero initiatives and delivery

• Through the creation of the Local Net Zero Forum, continuing the Local Net Zero Hubs Programme, and establishing Net Zero Go, digital platform providing advice to help local authorities make progress on net zero.
• Announcing wide-ranging devolution deals which include first-of-kind pilots for retrofit funding from 2025 which provide scope for a greater role to plan new energy infrastructure investment strategically.

Empowering the public and business

• By sending clear regulatory signals, making the green choice the easiest, making the green choice affordable, empowering people to make their own choice, motivate and build public acceptability for major changes, and presenting a clear vision of net zero and the role of people and business in achieving that vision.

Overall response from the Public and Private Sector

There has been a mixed response from the public and private sector relating to the latest publications.

Public Sector concerns

There is criticism levied at attaching retrofit programmes exclusively to devolution deals, which can have a limiting effect. Any region/sub-region which opted out of a mayoral model would potentially be left behind by regions which have adopted such models. It would be unfair if the benefits of retrofit were not applied where they were most beneficial and instead were selected on the basis of governance model. The funding and powers gifted by such decarbonisation schemes should not be restricted to certain governance models concentrated in specific geographic locations.

Private Sector concerns

There is a distinct lack of imagination and concrete initiatives to turn the policy wording into an attractive programme to encourage innovative bids and investment. There is not enough there to incentivise investment in the same way that there was for solar panels on roofs and ground source heat pumps in homes.

Claire Mack from Scottish Renewables commenting that “Today’s announcements should have been a defining moment for the UK – a chance to encourage the necessary investment to deploy the renewable energy projects required to safeguard our energy security It is unacceptable that they have fallen so far short.” Ana Musat from RenewableUK shared similar sentiments that the proposals do “not go far enough to attract the investment we need in the renewable energy sector aid global competition for investment in renewable energy projects which is fiercer than ever.”

One major concern in relation to investment into green technologies in the UK – particularly in the energy sector concerns the use of windfall taxes. This has dissuaded further investment into the energy sector; as an example, Darren Woods, Chief Executive of ExxonMobil, stated on 7^th March that the company was likely to re-evaluate its UK and European strategies in favour of taking advantage of the benefits offered by the US’ Inflation Reduction Act 2022.

As a corollary to the proposals put forward in Powering Up Britain and Mobilising Green Investment, the US Inflation Reduction Act contains more than £300 billion worth of government loans, subsidies and grants for the energy transition. This huge figure, coupled with the fact that the US did not impose windfall tax on the energy sector, further substantiates the US as a primary destination for green investment. Josh Burke from LSE comparing the two schemes stated “instead of grasping this historic moment the government has been left trailing behind the Inflation Reduction Act and is currently failing to capitalise on the opportunities a green transition will provide.”

The Institute of Directors has called on the UK Government to be significantly more active in incentivising green industries and technologies. Roger Barker, the Director of Policy at the Institute, stated that “It’s imperative that government and the private sector work together, otherwise the UK will find itself left behind in the accelerating race to lead the green economy.”

You can find the full publications below:

• Powering Up Britain – The Net Zero Growth Plan
• Powering Up Britain – Energy Security Plan
• Mobilising Green Investment – 2023 Green Finance Strategy