Policy smog is holding back UK net zero progress
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When it comes to the UK and net zero, the Gigastack project is a bit of a political favourite.
You can see why. The demonstration project is in the high-tech and high-hype area of green hydrogen. It sits squarely in levelling-up country, bringing together Ørsted’s large wind farm off the coast of Yorkshire with ITM Power’s new electrolyser factory in Sheffield with a plan to power Phillips 66’s Humber refinery.
Business secretary Kwasi Kwarteng visited the project last year, and again recently as part of unveiling the government’s hydrogen strategy. Gigastack has received various bits of government support, including £7.5m last year.
It is a shame then that it is being held back — by government policy.
That is according to a speech this week by CBI head Tony Danker. The business lobby group’s complaints about rising tax on UK business captured the headlines. But it was Danker’s comments on government policy around reducing carbon emissions that were unusually pointed.
The UK, he suggested, risked being “complacent”, and “too proud about what we’ve done so far”. Ahead of COP26, companies looking at investing in the UK wanted “plans not platitudes” and “more details, less declarations”.
He has a point. The UK has reduced coal use to less than 2 per cent of power generation last year, from 40 per cent in 2012, a regular political talking point. But self-congratulation is pointless when Climate Action Tracker ranks UK policy, along with the rest of Europe, as “insufficient” against what is required to hit the Paris goal of limiting warming to well below 2°C, in itself arguably not enough.
The lack of clarity and detail underpinning the UK’s various green strategies and 10-point plans is a theme that comes up repeatedly in conversations with executives. There were hopes that the long-awaited hydrogen strategy would unlock development of a resource expected to be crucial in reaching net zero, building on the success of using contracts for difference in boosting renewables generation. Instead, notes the CBI, the sector got another consultation.
The UK has “not yet put in place a business model for green hydrogen and incentives, and that’s what we need”, said ITM Power boss Graham Cooley. Being slow risks losing investment, jobs and export capacity to other countries, a point also recently made by the TUC. “It needs to be an industrial policy, not just an energy policy,” Cooley said, which is awkward for a government that ditched its commitment to industrial policy earlier this year.
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Kwarteng, an instinctive free marketeer, now embraces the role of state in shaping and directing the transition to net zero. But the competition to attract investment in the supply chain for, say, electric vehicles is likely to be intense, an area where one businessman suggested to me recently that the government remains unengaged. The renewables sector this week welcomed the biggest ever auction for wind and solar projects. But a road map of more regular auctions and leasing rounds will be needed to deliver the required long-term investment and hit government goals.
Doing more does not just mean nurturing shiny, new technology or flinging money at business (although the CBI argues the UK is underspending the US and EU on green investment). It should mean prodding sectors to make decisions on the options available now. “The [steel] industry is using and abusing the fact that government is not clear what they want,” said Ron Deelen, the former boss of British Steel who now works as a freelance consultant.
Most products made in the UK could be produced using scrap in electric arc furnaces, said Deelen, reducing emissions by some 80 per cent. But the lack of a hard deadline from government (after the independent Climate Change Committee recommended decarbonising the sector by 2035) and the prospect of other emerging technologies, including “green steel” using hydrogen, gives the sector reason to prevaricate.
Of course, it is tempting for business to wait for the perfect, future-proof technology. And for the government to want to craft the ideal policies to get us to net zero. In reality, when it comes to climate change, less perfect but more immediate should be where it’s at.