Contact us
Client and adviser portal
Log in

Powering Up Britain

  • Investment Insights
  • 3 minute read

What happened?

On Thursday 30 March the UK government released new plans to clarify its ambition to make the UK net-zero by 2050. Its Powering Up Britain and Carbon Budget Delivery plans come in response to a High Court ruling last year that its Net-Zero Strategy lacked detailed policies on how carbon emission targets will be met.

The government also wants to enhance the UK’s energy security - namely access to reliable, affordable energy - using the same set of net-zero polices. However, there is a risk that the policies are not fit for purpose to tackle both at the same time.

Net-Zero Ambitions

There is no question that to achieve net-zero emissions by 2050 the UK has to dramatically reduce its over 75% reliance on fossil fuel energy1, and decarbonise emission-intensive transport and industrial processes.

Powering Up Britain restates many previous policies but it also supports net-zero ambitions through new commitments that include:

  • The launch of Great British Nuclear to lead delivery on new innovations
  • Eight new carbon capture, usage and storage (CCUS)2 projects
  • Identification of 20 potential green hydrogen projects for due diligence
  • The launch of a Floating Offshore Wind Manufacturing Investment Scheme to reduce the cost of offshore wind

However, these initiatives have drawbacks. New nuclear technologies include small modular reactors (SMR) that are faster and cheaper to build but are not likely to be commercialised before 2030. They will be an important solution but are not likely to help medium-term energy security or decarbonisation plans. CCUS is an energy-intensive and inefficient process and there are fears it encourages further use of fossil fuels. In a similar vein, the production of hydrogen from water with the use of renewable energy (‘green hydrogen’) is currently expensive and less than 50% efficient.3

Moreover, the benefits of developing new wind power are limited by battery technology and grid connections, areas Powering Up Britain does not cover in detail.

Energy Security

Since Russia’s invasion of Ukraine last year, the subsequent reduction in gas supply and soaring energy prices have caused a sharp focus on energy security and highlighted the risks of being dependent on foreign fuel.

The most readily available way to alleviate energy security concerns is to use domestic, cheap fossil fuels. In recognition of this, Powering Up Britain intends ‘maximising the vital production of UK oil and gas as the North Sea basin declines’. However, this is at odds with the UK’s net-zero ambitions and is likely to draw criticism.

Powering Up Britain also aims to tackle energy security through the new initiatives for independent and clean power sources outlined previously. However many of these technologies (SMR, CCUS and green hydrogen) are relatively new and have long lead times, undermining their usefulness to protect near-term energy security. The plan appears to favour these technologies over solutions that are readily available and cheaper, particularly on-shore wind; here Powering Up Britain makes no indication that the ban for on-shore farms will be lifted.    

Key to providing energy security is a reduction of energy demand but there are worries that the Powering Up Britain policies make little progress on areas such as building insulation and heat pumps - solutions that would also aid progress towards the net-zero  2050 goal. Powering Up Britain rebranded an existing £1bn scheme into the Great British Insulation scheme that will only support 300,000 of the UK’s least energy-efficient homes. It also extended the £5,000 grant for homes to replace existing gas boilers with heat pumps, but in February the government’s independent climate change advisor, the Climate Change Committee, described this scheme as seriously failing.

Moving Forward

The plans tread a fine line between protecting national energy security and achieving net-zero by 2050. In doing so, it has already received backlash from non-governmental organisations claiming that the details are not far-reaching enough to be consistent with the required decarbonisation pathway.4

Indeed, the government admitted in their Carbon Delivery Budget Plan that the quantified polices only meet 92% of their 2030 emission commitments.5 It remains to be seen whether further legal action will be taken on the government’s new strategy and we will continue to monitor the situation closely in order to identify any investment opportunities that may arise.

 

  1. https://publications.parliament.uk/pa/cm5803/cmselect/cmenvaud/109/report.html
  2. CCUS is a process that involves capturing the carbon emissions from power generation and industrial processes, and either utilising or storing them underground.
  3. https://www.spglobal.com/marketintelligence/en/news-insights/latest-news-headlines/hydrogen-technology-faces-efficiency-disadvantage-in-power-storage-race-65162028
  4. https://friendsoftheearth.uk/climate/new-legal-action-looms-if-government-climate-plan-doesnt-add
  5. https://assets.publishing.service.gov.uk/government/uploads/system/uploads/attachment_data/file/1147369/carbon-budget-delivery-plan.pdf

 

Important information
The information contained in this article is believed to be correct but cannot be guaranteed. Opinions constitute our judgment as at the date shown and are subject to change without notice. The value of investments and the income from them may fall as well as rise and is not guaranteed. This document is not intended as an offer or solicitation to buy or sell securities, nor does it constitute a personal recommendation. Where links to third party websites are provided, Close Brothers Asset Management accepts no responsibility for the content of such websites nor the services, products or items offered through such websites.

!

Before you invest, make sure you feel comfortable with the level of risk you take. Investments aim to grow your money, but they might lose it too.

Close Brothers Asset Management Logo

Important compliance information for institutional investors and FCA authorised intermediaries

For use by institutional investors, FCA authorised intermediaries and connected persons only – it must not to be relied upon by retail clients. If you are a retail client please return to the main part of the website.

Please read this page before proceeding, as it explains certain restrictions imposed by law on the distribution of this information and the countries in which our funds are authorised for sale. It is your responsibility to be aware of and to observe all applicable laws and regulations of any relevant jurisdiction.

This part of the Close Brothers website is for information purposes only. It is not intended to be relied upon to make any investment decision. Although the information herein has been obtained from sources believed to be reliable, neither Close Brothers Asset Management or any of its employees guarantee its accuracy, completeness or fairness. The most recent data has been used where possible. Except in so far as liability under any statute cannot be excluded, no member of Close Brothers Asset Management accepts liability (whether arising in contract, tort or negligence) for any error or omission in this document. 

The information contained on these pages is believed to be correct but cannot be guaranteed where data is sourced from third parties. Opinions constitute our judgment as at the date shown and are subject to change without notice. The information on this website is not intended as an offer or solicitation to buy or sell securities, nor does it constitute a personal recommendation. This does not constitute an offer or solicitation to sell shares in any of the funds referred to on this site, by anyone in any jurisdiction in which such offer, solicitation or distribution would be unlawful or in which the person making such offer or solicitation is not qualified to do so or to anyone to whom it is unlawful to make such offer or solicitation. 

Applications to invest in any fund referred to on this site, must only be made on the basis of the offer document relating to the specific investment (e.g. prospectus, simplified prospectus or other applicable terms and conditions). 

As a result of money laundering regulations, additional documentation for identification purposes may be required when you make any investment. Details are contained in the relevant Prospectus or other constitutional document. 

If you are unsure about the meaning of any information provided please consult your Close Brothers contact, financial or other professional adviser. 

The information contained on this site is subject to copyright with all rights reserved. It must not be reproduced, copied or redistributed in whole or in part. 

We may source data from reputable third party data providers, however, we accept no responsibility or liability for the accuracy of such data. 

We accept no liability whatsoever for any direct or consequential loss arising from any use of this report or its contents. 

You acknowledge and agree that it is your responsibility to keep secure and confidential any passwords that we issue to you and your authorised employees and not to let such password(s) become public knowledge. If any password(s) become known by someone other than you and your authorised employees, you must change those particular password(s) immediately using the function available for this purpose on the Website. 

On accessing the Close Brothers Asset Management website, you are aware of the following investment risks applicable to all Close Funds: 

PAST PERFORMANCE RISK-Past performance, though extensively used in analyzing investments, is not a reliable indicator of future returns. 

RISK OF PERMANENT CAPITAL LOSS-The risk that investments may fall in value permanently with little or no expectation of recovery, including the possibility of total loss of the amount invested. Typically, this applies to individual securities. 

RISK OF REDUCED INCOME-The risk that income derived from investments falls significantly and no longer fulfils its objective in a portfolio with a corresponding fall in the capital value if realised. 

VOLATILITY RISK-The risk of a decline in the value of a group of investments due to market fluctuations. Typically investors measure this risk over short timescales. 

INFLATION RISK-The risk that the growth of investments does not keep pace with inflation over the longer term, i.e. a reduction in the real purchasing power of one's capital. 

LIQUIDITY RISK-The risk that an investor cannot gain immediate access to capital. 

TAX RISK-The risk that the tax regime generally affecting returns, a particular asset or a specific tax efficient scheme may change or be removed with consequent impact on investment returns and strategies. 

CURRENCY RISK-The risk that movement in rates of foreign exchange may cause the value of investments and/or income derived from them to fluctuate independently of the value of the underlying asset and may amplify losses or impact gains when translated into the investor’s base currency. 

BENCHMARK RISK-The risk that investments do not beat a specific benchmark over the longer term, e.g. the failure to match the returns of a given equity index, bond index, or a blend of these. 

This site is operated by Close Asset Management Limited (Company No. 1644127) which is registered in England and Wales, is authorised and regulated by the Financial Conduct Authority and is a subsidiary of Close Brothers Group plc. Close Asset Management Limited is a member of the Close Asset Management group and uses the trading name Close Brothers Asset Management. Registered office at 10 Crown Place, London EC2A 4FT. VAT Registration No 245 5013 86.