3 April 2023

There is a way to get to Net Zero, but the Government’s strategy isn’t it


Last week the Energy Secretary released a new strategy, pithily entitled ‘Powering Up Britain’. Grant Shapps was forced to produce this document because of the dogged efforts of Friends of the Earth. The environmentalists persuaded the courts that the Government’s Net Zero strategy contained legally binding targets, so ministers had until the end of March to announce how to achieve those targets.

The new strategy may be shallow and devoid of joined-up thinking, but I remain bullish about the future. Whatever the challenges thrown at humanity by climate change, I expect we will muddle through. The success of humanity has been our ability to adapt and turn adversity into opportunity.

Global warming should not prove the end of everything, nor even the block on growth that head-in-the-sand environmentalists demand. But nor will climate change deniers stop it from happening by ignoring the fact that climate change is happening.

The saner parts of the climate change lobby say we must approach this challenge like a war, which is what some nations are doing. The Americans have put in motion the somewhat misleadingly titled Inflation Reduction Act, which is really a massive $369bn subsidy programme to support climate mitigation and renewable technologies. The EU is working on its own programme to create new climate-positive growth.

Here in the UK, meanwhile, the Government has talked more about it than almost anyone else, held that jolly conference about climate change in Glasgow, and even asked a few environmentalist types about it.

The thing is the British piggy bank is empty, and the Chancellor says we don’t want to go ‘toe-to-toe’ with the ‘distortive’ US subsidy regime. Instead, we got some pretty charts showing we aren’t using much coal these days. By covering the nation with solar farms and filling the sea lanes with wind turbines, we’re doing well in replacing our decaying nuclear facilities with nice, clean, renewable power, which we bought on the cheap from China. 

It’s all working remarkably well. The UK is cutting emissions.

Except, that is, when we get a Dunkelflaute – the dainty German word for when the wind doesn’t blow. The freezing still air comes in from the Kremlin, and our phalanx of turbines fails to provide any energy. I must have missed the part in ‘Powering Up Britain’ about how the UK’s energy security works when it’s cold and the wind is not blowing.

There is a solution – energy storage. Capacitance, the holy grail of energy transition, would allow us to store the electricity wind farms generate when we don’t need it. We could store it in hydroelectric schemes like the Welsh Electric Mountain or Cruachan Dam in Scotland. This is proven technology that is already working today.

The centrepiece of the ‘Powering up Britain’ finagle is billions of pounds bet on carbon capture technology over the next 25 years, principally by storing carbon dioxide under the North Sea. As with so much of the energy transition, the problem here is there is no guarantee we can make these technologies work at the scale required.

Nor does the new plan address the IP domicile issue. New-technology UK energy projects, including Drax’s dubious bio-waste projects, are moving to the US to take advantage of the subsidies that don’t exist here.

Shapps’ plan also contains new proposals for getting more homeowners to convert to heat pumps, which can only heat most homes by completely rebuilding the central heating first. There are also proposals for carbon border taxes, penalising high-carbon goods from overseas, which will likely trigger trade retaliation.

The reality is the UK can get to Net Zero – but only with a properly thought out transition plan. It should involve nuclear, renewables, capacitance, innovation in hydrogen and new tech, and using natural gas as part of the transition plan, all while greening the environment and improving soils with carbon.

That is not the plan we currently have from the Government, which is giving a masterclass in political dither and puff. More to the point, we certainly won’t get there with hastily cobbled together documents, published at the behest of climate activists.

There are ways of getting to Net Zero, but they require properly joined up thinking – over to you, Mr Shapps.

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Bill Blain is market strategist and head of alternative assets at Shard Capital.

Columns are the author's own opinion and do not necessarily reflect the views of CapX.