Energy and net zero are once again in the headlines following the Prime Minister’s decision last month to relax some of the government’s key net zero deadlines, particularly around the roll out of electric vehicles (EVs) and the transition away from fossil fuel based heating.
This has - understandably - been met with some criticism from businesses, trade bodies and representatives from across the political sphere. Many see it as a worrying signal that more change could be on the way, despite Number 10’s reassurances that net zero by 2050 is still achievable.
The announcement came after a major year for the energy sector. A year ago, we saw the launch of the Energy Bill Relief Scheme (EBRS) - which has now changed to the Energy Bills Discount Scheme (EBDS) - to support businesses with rising energy costs due to the volatility in the wholesale markets.
This was followed by the publication of several major documents, including the ‘Independent Review of Net Zero’ by Chris Skidmore MP, and the government’s ‘Powering Up Britain’, which included the Net Zero Growth Strategy and the Energy Security Strategy.
We also saw the formation of a new government department - the Department of Energy Security and Net Zero (DESNZ) - and now have a new Secretary of State, Claire Coutinho.
For businesses, the plans to accelerate the growth of homegrown clean energy are welcome, as this is a key way to protect against some of the prices we have seen from the wholesale markets over the past two years.
However, there were concerns that not enough was being done to support their net zero ambitions, particularly when it came to incentives to reduce demand and carbon emissions through energy efficiency, or to install sustainable on-site energy generation. In this way, the Prime Minister’s latest announcement will do nothing to allay those fears.
As our Chief Operating Officer, Anthony Ainsworth, said:
“Shifting the goalposts only leads to uncertainty, which is the last thing businesses want at the moment. They need certainty to give them the confidence to invest in the necessary measures to decarbonise their operations. Put simply, if businesses don’t invest, then net zero won’t be possible.”
In addition, the UK is facing increased competition from overseas. In the US, the Inflation Reduction Act has pledged $367 billion of investment in green initiatives for the next ten years, mainly through tax incentives, while in the EU, the Green Deal Industrial Plan is designed to relax state aid restrictions for net zero industries through a proposal for a Strategic Technologies for Europe Platform. The aim is to reach €160 billion in investments in the coming years.
Both of these could see investment redirected away from the UK.
So, what does this mean for UK businesses?
The vital role of business in energy security and net zero
The good news is that businesses back net zero - our 2023 Business Energy Tracker showed that sustainability investments are the top priority for businesses, up from second place in 2022. They recognise that, as well as helping them reach their net zero targets, a key benefit is greater long-term operational resiliency.
In addition, many organisations are already doing great things. Coventry City Council and E.ON recently announced a pioneering 15-year partnership which will transform the city’s approach to carbon reduction whilst helping people save money and boosting the local economy.
They also support the move to renewable energy. In fact, demand for clean energy is outstripping supply, which is why it is so important to accelerate the low-carbon transition.
This is why businesses are so important to the UK achieving its net zero ambitions.
They will champion sustainability, invest in the measures and technologies to get us there and spearhead the growth of green jobs.
However, policy needs to match this desire, and, at the moment, more needs to be done to support and empower businesses.
Our top three priorities for the government
While the recent announcements are concerning, there is still a lot of policy in the pipeline that could support businesses. Therefore, our wishlist for the new Secretary of State and her team is:
1. Set out a stable policy environment that hits our carbon budgets on the way to 2050.
There will be differing governments between now and 2050, so there is an opportunity to get some cross-party consensus to agree the solutions needed to meet our net zero ambitions. We also need reforms to planning to allow the rapid deployment of renewable assets and other crucial energy infrastructure.
2. Deliberately support the economics of decarbonisation projects.
Businesses need certainty if they are going to invest. For example, shifting policy costs away from power to gas (although this needs planning to reflect longer-term contracts) and getting a Carbon Border Adjustment Mechanism into place would all support green investment.
3. Get businesses involved in scheme design.
Businesses want to help government to reach net zero. However, it is important to avoid ‘bright ideas’ - do fewer things and do them well, and then let’s work together to deliver on those objectives. The voice of businesses needs to be heard.
In short, we need to look forwards, not back, and grasp the economic opportunity of the low-carbon energy transition.
To find out how we can support your business on its net zero journey, contact one of our team.
