Budget 2023: Chancellor backs nuclear and carbon capture in ‘energy reset’ – but leaves ‘glaring gaps’ in onshore wind, creaking grid, home insulation
The chancellor today skirted round contentious topics like onshore wind and home insulation in his budget, but did promise cash for nuclear power, carbon capture and energy bills.
The underlying commitment to net zero and clean energy were generally welcomed.
But campaigners have accused Jeremy Hunt of prioritising risky, “fanciful” technologies – such as machines that suck up carbon dioxide and bury it underground – over proven, but politically difficult, climate policies like boosting onshore renewables.
There is also widespread concern the budget does little to compete with the hundreds of billions unveiled by the US and EU to stimulate green growth investment, risking the UK falling behind in the “green industrial revolution”.
Nuclear reaction
A key announcement was that nuclear is to be classed as “environmentally sustainable”, subject to consultation, in a bid to pull in investment in the same way enjoyed by renewable energy.
Nuclear is costly and lengthy to build but provides reliable power without the pollution.
Government climate advisers say some nuclear power is vital to the UK’s clean energy future.
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£20bn allocated to Carbon Capture Storage
But the chancellor was criticised for rehashing old pledges.
He gleefully announced Great British Nuclear, an agency designed to revive the nuclear industry – but this has been promised before.
“The chancellor’s words on nuclear give a positive message, but it’s more like a ‘greatest hits’ compilation from the past, rather than anything new,” said Professor Adrian Bull, BNFL chair in Nuclear Energy and Society at the Dalton Nuclear Institute at Manchester University.
The government also announced a competition for mini reactors known as “small modular reactors (SMRs)”, which are not yet widely available.
If this young technology is “demonstrated to be viable” the government will “co-fund this exciting new technology”, the chancellor said.
This too resembles a previous announcement. In 2015 then-chancellor George Osborne launched a competition to identify the best design and get one built in the 2020s – a target yet to be hit.
Chris Stark, chief executive of the government’s climate advisors the Climate Change Committee (CCC), said nuclear seems to “have been announced and re-announced so many times”.
“SMRs [sic] would be useful if they are delivered as quickly as promised. Whether they will be though…” he wrote on Twitter.
Carbon capture, utilisation and storage
Another leap of faith, on top of the push for SMRs, is the push on carbon capture, utilisation and storage (CCUS).
It is an expensive technology, still in its infancy.
But the UK cannot afford to bypass CCUS, climate advisers said last week, because it is not cutting emissions enough.
Today the government pledged £20bn towards the technology in order to “increase resilience to future energy price shocks” – suggesting it would primarily be used to allow the UK to burn more gas, rather than to capture emissions from factories, for example.
Dr Steve Smith from Oxford University’s Smith School of Enterprise and the Environment said the funding was “good news” but needs extra policy decisions from government to become viable.
Some campaigners warn the UK is using it as an excuse not to cut emissions.
“Locking in reliance on gas power will increase our vulnerability to future energy price shocks, while adding in the additional costs, risks and uncertainty of trying to capture emissions from gas power plants,” said Alethea Warrington, senior campaigner at climate charity Possible.
“Including carbon capture will add even more costs, while being unproven to actually work and putting our climate, as well as our finances, at risk.”
Meanwhile Greenpeace called the £20bn over 20 years “frankly pathetic compared to the green growth investments being made in the US, EU and China”.
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Tom Heap investigates hydrogen’s role in the future of heating UK homes.
Capital expensing – and can the UK rival the US and EU’s mega green growth packages?
Sam Hall, director of the Conservative Environment Network, said today’s measures do bring the country closer to net zero.
He welcomed the announcement of full capital expensing for the next three years, saying it would help attract more investment in renewables and the supply chain. This should please the offshore wind sector.
“But with the USA and EU offering enormous green subsidies, the UK needs to up its game” to remain an attractive place to invest in wind and solar, as well as the next generation of clean industries like sustainable aviation fuel and green hydrogen, added Mr Hall.
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Experts are warning of the risk to rivers following the driest February for 30 years.
But the government will be talking more about net zero before the end of the month – the deadline by which it has to respond to a legal ruling on its net zero strategy.
The courts found the government’s net zero strategy was unlawful because it failed to outline how climate policies would meet legally binding carbon budgets – forcing ministers to rework their plans.
‘Zero mention of renewables’
Many were disappointed that the chancellor steered clear of lifting a de facto ban on onshore wind.
Antony Froggatt, of thinktank Chatham House’s Environment and Society Programme, said: “In the UK Budget there is zero mention of renewables and only £105m set aside for community supported energy efficiency compared to £235m funding for potholes.”
Onshore wind is politically contentious, with recent governments changing their minds on it.
Meanwhile, the EU and US are “rolling up their sleeves and supporting the domestic production of electric vehicles, solar panels and wind turbines, that will bring jobs now and make a difference in the 2020s”, said Mr Froggatt.
He warned the chancellor to “be careful the UK isn’t left at the starting line of this new and more competitive low carbon race.”
Friends of the Earth criticised the “glaring gap” in the budget on onshore wind and home insulation.
Energy bill help a ‘sticking plaster’ compared with home insulation
Good news amid the cost of living crisis came in the form of a decision to extend the energy price guarantee, which caps average household bills at £2,500, for a further three months to June.
It had been due to rise to £3,000 in April and the cost of scrapping the planned 20% increase will amount to around £3bn.
However, the chancellor stopped short of new commitments on home insulation, which advocates say would bring down household bills permanently.
In his autumn statement Hunt did pledge £6.6bn during this parliament for energy efficiency, and a further £6bn from 2025. But energy groups say £6bn a year is needed to upgrade leaky homes and promote heat pumps.
Insulation rates were over 90% higher in the 2000 and 2010s to 2013, at which point the Cameron administration “cut the green crap”, according to thinktank ECIU.
Jo-Jo Hubbard, CEO of network optimisation specialist Electron, called the energy bill support a “sticking plaster” that is “about to wash off.”
Upgrade the grid!
Instead the government should upgrade Britain’s outdated electricity network, added Ms Hubbard, one of many in the industry warning of the problems it is creating.
At the moment consumers are paying for wind to be switched off when the grid can’t handle the capacity. New power capacity is also waiting to be connected, said Ms Hubbard.
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Octopus Energy Group, Britain’s largest residential gas and electricity supplier, is plotting a £10bn demerger of its technology arm that would reinforce its status as one of the country’s most valuable private companies.
Sky News can exclusively reveal that Octopus Energy is close to hiring investment bankers to help formally separate Kraken Technologies from the rest of the group.
The demerger, which would be expected to take place in the next 12 months, would see Octopus Energy’s existing investors given shares in the newly independent Kraken business.
A minority stake in Kraken of up to 20% is expected to be sold to external shareholders in order to help validate the technology platform’s valuation, according to insiders.
One banking source said that Kraken could be valued at as much as $14bn (£10.25bn) in a forthcoming demerger.
Citi, Goldman Sachs, JP Morgan and Morgan Stanley are among the investment banks invited to pitch for the demerger mandate in recent weeks.
A deal will augment Octopus Energy chief executive Greg Jackson’s paper fortune, and underline his success at building a globally significant British-based company over the last decade.
Octopus Energy now has 7.5m retail customers in Britain, following its 2022 rescue of the collapsed energy supplier Bulb, and the subsequent acquisition of Shell’s home energy business.
In January, it announced that it had become the country’s biggest supplier – surpassing Centrica-owned British Gas – with a 24% market share.
It also has a further 2.5m customers outside the UK.
Kraken is an operating system licensed to other energy providers, water companies and telecoms suppliers. Pic: Octopus
Sources said a £10bn valuation of Kraken would now imply that the whole group, including the retail supply business, was worth in the region of £15bn or more.
That would be double its valuation of just over a year ago, when the company announced that it had secured new backing from funds Galvanize Climate Solutions and Lightrock.
Shortly before that, former US vice president Al Gore’s firm, Generation Investment Management, and the Canada Pension Plan Investment Board increased their stakes in Octopus Energy in a transaction valuing the company at $9bn (£7.2bn).
Kraken is an operating system which is licensed to other energy providers, water companies and telecoms suppliers.
It connects all parts of the energy system, including customer billing and the flexible management of renewable generation and energy devices such as heat pumps and electric vehicle batteries.
The business also unlocks smart grids which enable people to use more renewable energy when there is an abundant supply of it.
In the UK, its platform is licensed to Octopus Energy’s rivals EON and EDF Energy, as well as the water company Severn Trent and broadband provider Cuckoo.
Overseas, Kraken serves Origin Energy in Australia, Japan’s Tokyo Gas and Plentitude in countries including France and Greece.
Its biggest coup came recently, when it struck a deal with National Grid in the US to serve 6.5m customers in New York and Massachusetts.
Sources said other major licensing agreements in the US were expected to be struck in the coming months.
Kraken, which is chaired by Gavin Patterson, the former BT Group chief executive, is now contracted to more than 70m customer accounts globally – putting it easily on track to hit a target of 100m by 2027.
Earlier this year, Mr Jackson said that target now risked being seen as “embarrassingly unambitious”.
Last July, Kraken recruited Amir Orad, a former boss of NICE Actimize, a US-listed provider of enterprise software to global banks and Fortune 500 companies, as its first chief executive.
A demerger of Kraken will trigger speculation about an eventual public market listing of the business.
Its growth in the US, and the relative public market valuations of technology companies in New York and London, may put the UK at a disadvantage when Kraken eventually considers where to list.
One key advantage of demerging Kraken from the rest of Octopus Energy Group would be to remove the perception of a conflict of interest among potential customers of the technology platform.
A source said the unified corporate ownership of both businesses had acted as a deterrent to some energy suppliers.
Kraken has also diversified beyond the energy sector, and earlier this year joined a consortium which was exploring a takeover bid for stricken Thames Water.
This weekend, Octopus Energy declined to comment.
The boss of Ryanair has told Sky News the president of the European Commission should “quit” if she can’t stop disruption caused by repeated French air traffic control strikes.
Michael O’Leary, the group chief executive of Europe’s largest airline by passenger numbers, said in an interview with Business Live that Ursula von der Leyen had failed to get to grips, at an EU level, with interruption to overflights following several recent disputes in France.
The latest action began on Thursday and is due to conclude later today, forcing thousands of flights to be delayed and cancelled through French airspace closures.
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Mr O’Leary told presenter Darren McCaffrey that French domestic flights were given priority during ATC strikes and other nations, including Italy and Greece, had solved the problem through minimum service legislation.
He claimed that the vast majority of flights, cancelled over two days of action that began on Thursday, would have been able to operate under similar rules.
Mr O’Leary said of the EU’s role: “We continue to call on Ursula von der Leyen – why are you not protecting these overflights, why is the single market for air travel being disrupted by a tiny number of French air traffic controllers?
Ryanair has cancelled more than 400 flights over two days due to the action in France. File pic: PA
“All we get is a shrug of their shoulders and ‘there’s nothing we can do’. We point out, there is.”
He added: “We are calling on Ursula von der Leyen, who preaches about competitiveness and reforming Europe, if you’re not willing to protect or fix overflights then quit and let somebody more effective do the job.”
The strike is estimated, by the Airlines for Europe lobby group to have led to at least 1,500 cancelled flights, leaving 300,000 travellers unable to make their journeys.
Michael O’Leary believes the EU can take action on competition grounds. Pic: PA
Ryanair itself had axed more than 400 flights so far, Mr O’Leary said. Rival easyJet said on Thursday that it had cancelled 274 services over the two days.
The beginning of July marks the start of the European summer holiday season.
The French civil aviation agency DGAC had already told airlines to cancel 40% of flights covering the three main Paris airports on Friday ahead of the walkout – a dispute over staffing levels and equipment quality.
Mr O’Leary described those safety issues as “nonsense” and said twhile the controllers had a right to strike, they did not have the right to close the sky.
DGAC has warned of delays and further severe disruption heading into the weekend.
Many planes and crews will be out of position.
Mr O’Leary is not alone in expressing his frustration.
The French transport minister Philippe Tabarot has denounced the action and the reasons for it.
“The idea is to disturb as many people as possible,” he said in an interview with CNews.
Passengers are being advised that if your flight is cancelled, the airline must either give you a refund or book you on an alternative flight.
If you have booked a return flight and the outbound leg is cancelled, you can claim the full cost of the return ticket back from your airline.
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