Whether referred to as ‘Energy Security Day’, ‘Green Day’ or ‘The Green Moment’, the government announcement focused on clean energy and the UK’s transition to net zero was highly anticipated. On 30th March, it landed with over a thousand pages of strategies, plans, consultations, policy decisions and funding commitments.
The CBI is clear that, for business, the delivery of net zero is an enormous economic opportunity. Spurred on by their customers, investors and staff, increasing numbers of businesses are committing to sustainability targets, and believe the UK stands to gain from establishing itself as a global leader in green technology. With the right conditions, a wall of private capital can be unleashed towards this goal.
But the UK is not alone in seeking to grow market share in the green economy. Notably, the US Inflation Reduction Act and the EU’s Green Deal Industrial Plan are bold moves aimed at attracting private investors. In that context, businesses will assess the new Powering up Britain – Energy Security Plan and Net Zero Growth Plan, alongside the refreshed Green Finance Strategy, on whether it helps the UK step up to and surpass this fierce competition.
What’s the assessment?
The CBI responded positively to the numerous measures announced. Businesses have been seeking greater policy certainty from government on technologies, planning and regulation, alongside a sense of urgency on the delivery of programmes aligned to the net zero agenda. Broadly, there has been progress on both counts.
But, as ever, there is more to do. The Chancellor himself has committed to looking closely at the role the Treasury can play in driving investment in response to the Inflation Reduction Act, and the Government is choosing to consult further on various parts of the plan.
So, despite the number of pages published, it is by far the end of the story.
Energy security and green technology
What was delivered?
The confirmation of the creation of Great British Nuclear and a new competition to back Small Modular Reactors, the launch of a new programme to support the development of floating offshore wind and the announcement of successful projects in the hydrogen economy were among the positive steps.
Eight carbon capture projects were selected to enter into commercial negotiations for deployment, moving this technology from ambition to delivery – a hugely significant step. However, the failure to back any projects from the strategically important Humber cluster, being the UK’s most carbon intensive, is a missed opportunity. The government will have to work quickly to provide clarity to businesses in the region about how those projects can be accelerated from here.
What was missing?
Outside a fiscal event, it was perhaps unsurprising that there was little movement on investment incentives for energy generating infrastructure. This will therefore become a focus for the CBI’s advocacy in the months ahead. There was also no indication of government intention to change Ofgem’s statutory duties to include a duty to support the delivery of net zero.
Next steps?
The CBI will consult with members to understand the outcome of the carbon capture and hydrogen decisions, ensuring there is a route forward that enables the decarbonisation of our industrial base. We will also monitor Parliament as Government takes the Energy Bill through its final stages and will centre the green economy as we head towards the next fiscal event in the autumn.
Planning and finance
What was delivered?
The government provided further details on ways it hopes to speed up planning processes to deliver clean energy infrastructure more quickly. It published new National Policy Statements for consultation that will guide decisions on Nationally Significant Infrastructure Projects (NSIPs). It also committed to a new ‘Fast Track’ consenting process for offshore wind to be operational later this year. In addition, progress on accelerating grid connectivity should be imminent, with an action plan due in the summer of this year.
There was a welcome focus on cementing the UK as a global hub for green finance as well as on delivering sectoral roadmaps to attract investors to key sectors in the transition. New consultations on the UK green taxonomy and the transition plan reporting requirements are going with the grain of CBI priorities. The establishment of a new Net Zero Business Investment Group will bring the private sector into dialogue with policy makers to tackle barriers to investment in key sectors of the economy.
What was missing?
Measures on planning, consenting and grid connectivity were future commitments for change rather than an immediate implementation of a new process. The onus is therefore on the CBI and others to ensure they are followed through with quickly. The totemic issue of planning for onshore wind was not addressed in a meaningful way. Instead, signals were made to the government response to the National Planning Policy Framework consultation by Spring as the route for this.
Similarly for finance, we can expect a raft of consultations over the rest of the year, including on transition finance, the UK Taxonomy and the next steps of the International Sustainability Standards Board (ISSB). There is an imperative to move these through to conclusions quickly. However, there was no commitment to an overarching Net Zero Investment Plan (a CBI ask) nor was there a full overview of the investor roadmaps it plans to deliver.
Next steps?
The CBI will work with government to ensure enabling legislation for the necessary planning reforms is passed and responding to the new consultations announced. We will aim to influence the delivery of the action plan for speeding up grid connections.
We will be closely involved in the establishment and operation of the Net Zero Business Investment Group and convening members to inform our position as options for the UK green taxonomy and future reporting requirements are assessed.
Buildings, transport and industrial decarbonisation
What was delivered?
Powering up Britain provided further detail on the Government’s approach to cutting emissions in the built environment with a particular focus on the electrification of home heating. The Boiler Upgrade Scheme that provides subsidies to households installing clean heating systems was extended to 2028 and a new Clean Heat Market Mechanism will be brought in from 2024.
Metaphorical champagne corks were popping in the CBI’s offices upon reading that the Industrial Energy Transformation Fund would be expanded and with a new phase for applications opening in 2024. And the Climate Change Agreement Scheme which provides reduced CCL rates for eligible businesses will be extended by two years.
A long-awaited response to the consultation on a zero-emission vehicle mandate was launched as was additional funding for charging infrastructure. For aviation, there was a second consultation on the design of a mandate for airline’s purchase of sustainable aviation fuels.
What was missing?
While the previously announced extension of the ECO+ scheme for energy efficiency was confirmed (and renamed as the Great British Insulation Scheme) there was not much detail to support firms with the retrofit of commercial buildings. Nor were there any moves to regulate for energy performance standards in the private rented sector.
The publication of and response to the Philip New Review on sustainable aviation fuels (SAF) was not forthcoming, and industry calls for a price stability mechanism to attract investment in SAF have not yet been acted on.
Next steps?
The CBI will respond to consultations on the clean heat market mechanism and push for proactive planning by local authorities to enable these solutions. As part of our Green Growth campaign, we will outline the economic opportunities associated with the transition to clean transport and identifying measures – such as a contracts for difference for sustainable aviation fuels – that will enable these prizes to be won.
