Key takeaways from the UK Government's "Green Day"

“Green Day” on Thursday last week saw the UK government publish a suite of policy documents to support its energy security and net zero objectives which include directing significant investment toward net zero innovation and becoming a net zero economy by 2050. The UK government has also published the related updated Green Finance Strategy which we cover here. The following will be of particular interest to those in the housebuilding, transport, and renewables sectors.

The policy documents issued by the UK government included a report on “Powering up Britain” (read more of our analysis on the report here), and the “UK Net Zero Research and Innovation Framework: Delivery Plan 2022 to 2025” (the Delivery Plan).

The “Powering up Britain” report promotes energy security, with the UK government aiming to reduce reliance on imported fossil fuels in favour of cheaper, domestic sources of renewable energy. Consumer security and economic security are key, with the UK planning to have “among the cheapest wholesale electricity prices in Europe by 2035”.  Points to note for housebuilders and developers include:

- The government’s plan to phase out natural gas boilers by 2035, with homes being heated by electricity rather than imported gas, and the government incentivising the use of heat pumps rather than traditional boilers.

- The government’s plan to reform the grid connections process at both transmission and distribution levels, which is intended to cut power delivery times in half.

- The government’s focus on carbon capture and storage, with £20 billion being invested towards this in a “world-leading commitment to carbon capture, usage, and storage”.

The UK government is also investing £4.5 billion into net zero research and innovation programmes between 2022 and 2025. The Delivery Plan is a baseline from which to measure the progress and success of the government’s R&I portfolio, and to help with future spending decisions. While the Delivery Plan focuses on the start-up phase, government-funded R&I is intended to give way to public and private finance as the private sector’s confidence to invest grows. Points to note for housebuilders and developers include:

- £264 million being allocated to R&I to reduce the cost of heat pumps with the aim that all new-build homes from 2025 have low carbon heating.

- The government’s portfolio being weighted towards the transport sector, with £1.9 billion allocated towards R&I on transport systems and technologies given that this sector has the highest carbon emissions in the UK. The aim is to make the UK a “hub for green transport, technology and innovation”.

- The government’s plan to decarbonise the UK electricity system by 2035.

“Green Day” has attracted significant press criticism for not matching up to the scale of the measures to incentivise growth and innovation in clean tech in the US’ Inflation Reduction Act (which directs almost $370 billion in funding towards green energy), and the EU Net Zero Industry Act. There are concerns that the UK will lose out on green investment given this mismatch in ambition. High levels of investment are required to commercialise and finance the green technologies needed to heat homes and power green industries in the UK. Lasting energy security is also a key concern for people and businesses, and it’s likely that scrutiny on this issue will continue.

If you would like any further information regarding the above topics, please do not hesitate to reach out to your usual CRS contact.