3 questions left unanswered by Rishi Sunak’s “Powering Up Britain” strategy
By Ross Melton, Associate Director
While Rishi Sunak’s Powering Up Britain strategy and accompanying consultations, appendices and ancillary documents stretched to over 1000 pages, it still left many questions unanswered.
As industry continues to digest the meaning and significance of the Government’s latest energy strategy, we’ve delved into the detail to identify what Powering Up Britain tells us about the Prime Minister’s vision for decarbonising the economy; how the UK Government continues to struggle with targeting state support; and whether the UK can compete in the global race for net zero opportunities.
Is Rishi Sunak serious about climate change?
The Prime Minister was originally scheduled to launch the “Energy Security Strategy” in Aberdeen – the oil and gas capital of Europe, and coincidentally my hometown.
Foregrounding the 100 new exploration licences currently being auctioned for the Cambo oilfields, Conservative insiders briefed that new fossil fuels would be essential to the UK’s energy security. But in the face of growing internal and external criticism that this approach would be incompatible with the UK’s climate change commitments of limiting global warming to 1.5°C over pre-industrial levels, the plan was rapidly reformatted into the readily-mocked “Green Day”.
With pressure from both the climate sceptic right – spearheaded by the latest ERG reinvention as the Climate Scrutiny Group – and the left of his Party, under the Conservative Environment Network, Downing Street brokered a compromise.
The final Powering Up Britain Strategy is the product of this unresolved internal debate, simultaneously enabling an estimated billion tonnes of new carbon emissions from oil and gas exploration, while also paving the way for 17.8GW of floating offshore wind, 70GW of solar generation and advanced technologies like small modular nuclear reactors and fission power which promise to rapidly make the burning of fossil fuels redundant.
According to the Government’s 2018 cost estimates, onshore wind remains the cheapest form of energy generation at around £46/MWH, compared to £57/MWH for offshore wind, and £85/MWH for gas-fired baseload generation (a significant underestimate in 2023 due to the rising wholesale cost of natural gas). Many have been left wondering why lifting the moratorium on onshore wind developments was left out of a strategy focused upon boosting energy security and affordability.
Why doesn’t the UK pick winners?
In 1954, Winston Churchill founded the UK Atomic Energy Authority, tasked with developing civilian nuclear fission and fusion technology. For decades the UK was at the cutting edge of nuclear civil engineering and research. But despite the Prime Minister speaking only a few short miles away from the AEA’s primary research facility in Culham, the countries most associated with developing nuclear energy sites are France, the US and China. The latest nuclear reactor at Sizewell C is being designed and constructed by Framatome, a subsidiary of the French state owned EDF.
The Prime Minister has repeatedly outlined his vision to transform the UK into a “science superpower”, but the Powering Up Britain strategy demonstrates the political constraints upon that ambition. Rather than concentrating Government firepower upon proven and promising innovations, like small modular nuclear reactors and the fusion generation (neither of which received new money); the Prime Minister instead chose to spread his limited resources thinly, with the lion’s share of new financing placing a long-odds bet upon carbon capture and storage.
While CCUS is expected to play an essential, if limited, role in decarbonising energy intensive industries like steel production, 700 leading scientists recently wrote an open letter highlighting that CCUS has not yet been proven at scale and that prioritising the technology risks delaying real cuts in emissions.
Almost 70 years ago, the Conservative Government bet the farm on civil nuclear energy, and the country reaped the rewards. Today’s successors around the Cabinet table have invested £20 billion upon technologies described by Dr Friederike Otto, Senior Lecturer in Climate Science at Grantham Institute, as “essentially an ambulance at the bottom of a cliff.” Only time will tell if Sunak will prove as visionary as his predecessor.
Is Britain still in the race to Net Zero?
As Rishi Sunak stepped out to launch his Powering Up Britain strategy at the Tokamak fusion research facility in Oxfordshire, the rampaging elephants in the room went politely unmentioned.
With Joe Biden’s Inflation Reduction Act valued at over $369 billion, matched by the European Commission’s ambitious Net Zero Industry Act; pressure was on for the Prime Minister to pull-a-rabbit-out-of-a-hat to keep the UK competitive.
However, while the Strategy was refreshingly light on rhetoric but heavy on practical steps, former COP-26 President and Conservative backbencher Alok Sharma MP questioned the scale of the UK’s response:
The announcements made are a very welcome step in the right direction and rapid delivery is now vital. However, what we still need to see is that big bazooka moment, commensurate with the scale of the challenge. We cannot afford to wait for the government to set out the UK’s strategic response to green growth initiatives from other nations.
While the Inflation Reduction Act offers 230 million American homeowners up to a whopping $30,000 in tax rebates and subsidies to install EV chargers, domestic solar and energy efficiency measures, the Great British Insulation Scheme (GBIS) will help fund up to £3000 worth of wall and cavity insulation for around 300,000 UK homes.
With the UK’s post-Brexit and pandemic economy narrowly avoiding recession, few would argue that the UK can match the massive economic interventions underway in Washington and Brussels. But with smart, targeted investment and regulation, the UK has historically succeeded in punching above its weight, keeping pace with the brute force approach of our neighbours and global competitors. The proposed Carbon Border Adjustment Mechanism could be a key regulatory innovation, strategically incentivising private investment in a range of UK-based Net Zero industries, though this will take time to successfully develop and implement.
Achieving the UK’s Net Zero ambition is no small feat, and it remains to be seen whether spreading finite resources thinly across multiple decarbonisation routes will help the UK achieve those ambitions, and those of the world in a race to Net Zero. The commentary from many sides since Powering Up Britain was launched has been far from congratulatory. While the Government would have inevitably wanted to go further, this won’t be the last significant intervention a UK Government makes this decade.
Instinctif Partners provides deep sector expertise for our clients across the energy industry and its supply chain. To find out more about what Powering Up Britain or the global transition to Net Zero means for your business, your investors and your growth strategy, get in touch via email@example.com.