Powering Up Britain?
by Alex Tiley, Consultant
31/03/2023

Following the establishment of the Department for Energy Security and Net Zero (DESNZ), the Government has moved quickly to establish an energy ‘manifesto for the future’. The slew of newly published policy papers includes “Powering Up Britain”, published alongside the Government’s response to Chris Skidmore’s review of Net Zero objectives, “Mission Zero”, the Energy Security Plan, and the 2023 Green Finance Strategy. The two key objectives, delivering on net zero, and ensuring energy security, are presented as deeply interlinked by the Government. However, the critical detail lies between the lines, with energy security likely to take the leading role within the work of the newly formed department.

Without question, the crown jewel of the strategy is the further development of nuclear power. This may not sit well with some in the environmental lobby, but the Government is unequivocal that nuclear energy is the keystone for energy security. The Spring Budget already trailed this focus for the Government, with the establishment of Great British Nuclear (GBN), and further modular reactors. With GBN tasked with driving forward the establishment of more nuclear energy, the Government has established a separate entity that will seek to de-politicise the issue. However, the capital investment necessary in order to build new power stations remains in flux: it will likely be that energy companies, such as EDF, who are already involved in the funding of Sizewell C, will be required to carry the lion’s share.

Maybe this is no surprise. The thread of the need to bring along the private sector runs through much of the Government’s vision. From grants to Airbus to research hydrogen aviation as part of their net zero ambitions to extensions of the Industrial Energy Transformation Fund, the role of the private sector is pivotal.  Nonetheless, though the Government’s vision to leverage the private sector to make headway here is clear, it remains to be seen whether the vision outlined today will provide the private sector with the confidence that it needs to fully invest the capital required.

What is also apparent is the recognition from the Government that there is a deep requirement to modernise and green UK housing stock. The Great British Insulation Scheme will deliver £1 billion in investment in energy efficiency upgrades such as cavity and loft insulation with a primary focus on one area of the housing market the Government can change: council housing. These changes will bring down bills but, unless a similar scheme is made available for owner-occupied properties, the cost savings compared to the up-front costs of fitting insulation may not be compelling enough in the short term for homeowners. Clearly mindful of this, the Government plans to consult on how it can effectively implement these ambitions for homeowners.

Notably, many of the arguments put forward by the net zero and renewables sector on the economic benefits that can be unlocked from sustainability focused investment have found limited traction with DESNZ. In his review, Skidmore called net zero the “economic opportunity of the twenty-first century”, and while the Government acknowledges this in their response to the review, much of its response is focused on detailing where they believe they are already working to deliver on this. Compared to other countries, like the USA and the Biden administration’s Inflation Reduction Act, fully embracing the necessary investment to achieve net zero has not been placed centrally on the Government agenda. Given that that investment gap for net zero transition currently sits at an estimated £81-£111 billion for the 2020s, it yet remains to be seen if the UK’s current plans will unlock that level of investment from the private sector.

The plan has already come under criticism, considering the carbon capture plans to store CO2 under the North Sea to be “regressive”, and organisations like Friends of the Earth threatening to take the Government to court over it. The legal obligation to publish the plan was already the result of a High Court ruling, and the tensions between the Government and the environmental lobby are likely to remain. Energy companies have responded diplomatically but unenthusiastically to the plan, and the Energy Industries Council branded the command paper “underwhelming”. For a new department, looking to make its mark on the landscape and determine its ambitions, DESNZ’s vision has not been the triumphant agenda-setting exercise that many in government may have hoped.

You can read Atticus’ full overview of the key announcements and lines of the Governments Command paper here.