Why are we waiting? Green energy chiefs frustrated by UK’s slow response to Biden subsidies

LONDON — U.K. green energy chiefs are running out of patience.

Almost a year after U.S. President Joe Biden ushered in a mammoth package of green subsidies in the form of last summer’s Inflation Reduction Act (IRA), U.K. clean energy bosses are still waiting for a detailed response from the U.K. government.

The mammoth package — the most sweeping climate legislation in recent U.S. history — was signed into law in August and will dish out almost $400 billion in tax credits and other incentives to renewable industries, including solar farms and electric car manufacturers.

The EU responded in February with a promise to relax state aid rules and make it easier for renewable developers to access tax breaks, in a bid to help the bloc stay competitive with the U.S. Canada announced a package in March offering C$80 billion in tax credits for clean technologies, arguing that, on green investment, “if Canada does not keep pace, we will be left behind.”

But the U.K. is biding its time.

“I think that’s a shocking delay,” said Tessa Khan, founder and executive director of the climate organization Uplift. “Given that this is ultimately a competition and a race for investment, supply chains [and] jobs, [this] just means that we end up losing a significant amount of ground.”

Khan may have several more months to wait, with warnings from Chancellor Jeremy Hunt a full U.K. response will not follow until the autumn statement, likely October or November. 

“The U.K. has not responded and that sends a huge message to the industry, which I’d say is already on slightly shaky grounds in terms of its confidence in the government,” warned Clare Jackson, chief executive of the industry body, Hydrogen UK. 

She added: “I think the longer this delay goes on without a response to IRA, the more that industries start to make plans elsewhere.” 

Beyond delaying, some U.K. ministers have openly criticized Biden’s package as “protectionist.” Hunt himself said the U.K. will not go “toe to toe” with its closest ally.

Energy Secretary Grant Shapps told POLITICO in an interview earlier this month that the U.K. doesn’t need to emulate the U.S. package. “So, let me get this right: industry thinks the taxpayer should pay more toward their industry?” Shapps said.

Shapps said the U.K’s legally-binding emissions targets meant private investment in Britain was already achieving the same goals as Biden’s plan for the U.S.

A government spokesperson said the U.K. was “a world leader” in both tackling climate change and investing in green industries. “We have already attracted £120 billion of private investment in real terms in renewables since 2010, and expect to attract a further £100 billion of investment across the economy which will support up to 480,000 jobs by 2030,” they added.

Projects ‘ready to go’

The U.K. government did discuss some financing options when it set out a renewed net zero strategy in March. That document saw the government double down on a swathe of net zero targets and set mandates for industries including manufacturers of cars and heat pumps.

Sunak’s administration has pointed to £20 billion previously pledged for carbon capture, utilization and storage (CCUS) projects — the process of capturing carbon dioxide from manufacturing and storing it underground — and promised to pull “all levers available” to shift private capital.

“We don’t have to throw the same level of funding at it as the U.S., but we need to be smart about how we do it,” said Jackson. She called for progress in funding hydrogen and CCUS projects, details of which will be laid out in the government’s Energy Bill. The Bill is currently being scrutinized by committee before it heads back to the Commons for its report stage.

“These projects are ready to go and they involve companies who can invest elsewhere. They don’t have to invest in the U.K.,” she said.

Other industry figures said U.K. delays could deal a blow to the energy supply chain — the industries, materials and workers which keep energy supply ticking over. 

“Supply chain is a finite resource,” said Francesca Bell, fiscal and investor relations manager at the trade group Offshore Energies UK, which represents the oil and gas sector. “If we see that focus in the U.S. picking up even further, then there’s a question there about: ‘What does that mean for supply chain in the U.K. and how do we make sure that we keep people here?’”

Tom Greatrex, chief executive of the Nuclear Industry Association and a former Labour shadow energy minister, echoed the warning that if the U.K. didn’t respond soon it would impact the supply chain and, as a result, the industry’s ability to hit its net zero targets.

“The worst thing that could happen is, having said they’ll do it in the autumn, what we get in the autumn is something lackluster — or a sense there will be something very high level but there will be no detail to it, because what that will do is put people off seeing the U.K. as a serious place to invest,” he said.

The government currently has a target of 24GW of nuclear power by 2050 but existing projects have been beset by delays and mounting costs.

Ministers have committed to reaching a final investment decision on at least one nuclear power plant during this parliament. But likely contender Sizewell C — the site of two proposed reactors in Suffolk — still needs enough private capital to go alongside the £600 million previously pledged by the government before construction can begin. Here, too, energy bosses worry about a lack of clarity.

“There’s no way we’re going to get to either 24GW of nuclear or [a] net zero power mix by 2050 without that decision [on Sizewell C] being reached before the end of this parliament,” Greatrex said. He called for a “clear plan” for projects that will make up net zero targets, as well as “urgency” from the government on its proposal to bring nuclear into the U.K. green taxonomy.  

Sort it out

If the government is to have any hope of meeting its net zero targets — including decarbonizing the power grid by 2035 — it also needs to invest in overhauling the transmission network, industry chiefs warned. 

“It’s almost no good announcing new targets and ramping up the ambition if we don’t sort out the connections here,” said Ana Musat, executive director of policy and engagement at the trade group, RenewableUK. 

She said the U.K. did not need to “throw away our entire framework” or match the fiscal incentives on offer in the U.S., but Musat does want to see the ban on onshore wind projects lifted and progress on developing a business model for funding hydrogen schemes.

Some preparation is underway as the U.K. heads closer to the fall. A solar task force — initially recommended by Conservative MP Chris Skidmore in his review of the net zero strategy — met for the first time in May. It is tasked with scoping out actions needed to hit the current target of 70GW of solar power by 2035. 

“It’s an urgent problem, so we could always do with faster responses,” said Chris Hewett, chief executive of the trade body Solar UK and co-chair of the task force. “But having said that, there’s now a serious process going on in government.”

Hewett said “levers need to be pulled” in the autumn, including commitments to tackle grid problems and invest in training and skills.

Asked whether he felt the U.K. risked losing out on investment if it did not respond to the IRA soon, Hewett said: “I think that risk exists. Certainly there is a lot of capital interested in renewables at the moment and so it will be easier for them to deploy in other countries.”

“But it’s not all lost yet,” he added. “The task force helps — but the quicker they can come up with some more concrete actions, the more investors will have their heads turned as they have been by the Biden legislation.”