21 November, 2023
Business Green, by Sam Richards
In 2012 the UK generated almost 40% of our power by burning coal. As Prime Minister, David Cameron oversaw reforms, most notably the introduction of CfD auctions, that would transform our electricity system; today coal produces just over 1% of our electricity, with the majority of our power now coming from low carbon sources.
Yet towards the end of his time in No10 he went cold on the “green crap” - introducing the block on any new onshore wind in England, and in the process adding an extra £10bn onto our bills.
The new Foreign Secretary has joined a Government that is sending similarly mixed messages on net zero. Headlines about the end of the carpool carabinieri who’ll kick in your door if you aren’t sharing your ride to work with the rest of your street, have done little to improve the Government’s poll ratings. They have however shaken the confidence of many of the investors I speak to as part of our campaign - they ask is the country really committed to reaping the rewards of the transition, is Britain still one of the best places in the world to build the next generation of wind farms or batteries, or frankly any new clean tech?
Despite less boosterish mood music than in recent years, this anxiety is overdone. Behind the headlines and behind the scenes, there is significant work underway on making it faster and easier to build new sources of clean power - and the Chancellor has the chance to put (low carbon) rocket boosters under the green economy at the coming Autumn Statement.
While he has limited fiscal firepower, one significant move he could make would be to extend and expand full capital expensing - a policy introduced at the last Budget. Full expensing allows businesses to deduct the cost of any investments they do straight away from their corporation tax bills, rather than over a number of years. It is effectively an investment tax cut, and brings investment in new plants and machinery in line with everyday business consumables like paper and pens.
Unfortunately, some green kit such as wind turbines have so far only qualified for 50% capital allowances because they are what’s known as ‘long-lived assets’. Bizarrely this is less generous than the allowances available for oil & gas firms. The Chancellor should level the playing field and back those firms building the energy sources of the future.
The Government has also only introduced full expensing, for now, on a temporary basis. This means that businesses who have long-term rolling programmes of investments, like a set of large offshore wind farms, miss out on the bulk of the benefit. They should extend the policy and allow clean tech firms to make use of 100% capital allowances for the long run. This would give businesses the longer term certainty to invest - again a crucial point that has come up time and again in the conversations I’ve had with businesses since we launched last year.
There are, of course, levers beyond fiscal policy that the Chancellor can pull to make Britain a more attractive bet for clean tech firms.
In his recent net zero speech the PM signalled that he understood the planning and grid connection barriers currently delaying the rollout of new renewables and new EV chargepoints. It takes up to 13 years to get an offshore wind farm up and running; despite construction taking just 2. Our planning system is making it far too hard to build the new sources of power we need to become energy secure. The PM has trailed a shift to a system of spatial planning - a model to follow could be the clean energy zones that the EU have deployed, which allow clean energy developers to bypass cumbersome planning rules in areas of low natural value. At the same time they should accelerate grid connections - for everything from EV chargepoints, to new batteries - by introducing a market mechanism (allowing more valuable projects to bid for faster connections) and by getting rid of zombie projects currently squatting in the queue.
Last week I was in Glasgow to see Zenobe launch a new state of the art battery facility at Wishaw, a site that will provide crucial storage for those blustery days when we have more wind than we know what to do with. Clean tech entrepreneurs - despite inflationary headwinds and more muted mood music from Westminster - are still cracking on with building the industries of the future. But we’re making it harder than it needs to be - and the Chancellor has the opportunity to make it that bit easier.