Weekend press round-up: Government to fund new nuclear power station as part of net zero drive

In our latest review of sector coverage in the national media, there is speculation about an expected splurge of green policy announcements. Meanwhile, sponsors of COP26 have criticised the lack of organisation around the event, which is now less than two weeks away.

Government to fund new nuclear power station as part of Net Zero drive

Funding for a new nuclear power plant will be announced before the 2024 election, the Government will vow this week as it reveals plans to lower carbon emissions.

The Telegraph understands a promise to agree financing for the new plant during the current parliament will be included in the Government’s long-awaited Net Zero strategy.

The document, said to be more than 150 pages long, will detail how Boris Johnson plans to hit his pledge to bring the UK’s carbon emissions down to “net zero” by the year 2050.

It will cover everything from shifting away from polluting cars to adopting greener heating in homes and precedes next month’s Cop26 United Nations climate conference in Glasgow.

According to government insiders, the front-runner site to win the funding is Sizewell C, a nuclear power plant being proposed by EDF Energy for Suffolk.

Government financing could take the form of guaranteed fixed price for each unit of energy produced at the site – as happened with Hinkley Point – rather than only direct investment.

A government spokesman said: “Nuclear power has a key role to play as we work to build a strong, home-grown energy sector to further reduce our reliance on fossil fuels and exposure to volatile global gas prices.

“We are seeking to approve at least one more large-scale nuclear project in the next few years to strengthen energy security and create thousands of jobs.”

Mr Johnson’s Government has been holding talks with Rolls-Royce about taxpayer money going to help the company’s push towards such technology.

However, it is understood there is frustration within parts of Downing Street that the company has not moved at a quicker pace on the project.

Daily Telegraph

Pledge to slash cost of green heat pump

Ministers will pledge to bring down the cost of a heat pump to that of a new gas boiler by the end of the decade, as part of efforts to decarbonise home heating.

The promise is expected to be included in the government’s heat and buildings strategy to be published by ministers on Monday.

It will set out the government’s plans to install 600,000 heat pumps a year by 2028. Ministers will also pledge to invest £60 million in heat pump innovation to help to make them smaller and easier to install.

The cost of an installed heat pump is about £10,000 but Kwasi Kwarteng, the business and energy secretary, will set out the ambition to reduce this to £5,000 within three years.

By 2030 the government says it hopes to reduce costs further so that installing a heat pump costs households no more than fitting a standard boiler. A new combination boiler costs between £500 and £2,000, depending on the size of the house. Under the plans, new gas boilers will no longer be available from 2035.

The strategy will also include grants to help households to pay for the cost of switching to a heat pump.

A £400 million scheme in the spring will offer grants of £5,000 towards an air source heat pump and £6,000 towards a ground source heat pump.

The document is also expected not to rule out significant investment in hydrogen but will warn that it is too early to say whether it could replace natural gas as a widespread source of home heating.

It will commit ministers to make a decision within four years, depending on the results of trials that are under way across the country.

However, the document will add that achieving the capacity to install at least 600,000 heat pumps a year is a “no lose” strategy because this will be required regardless of whether hydrogen proves viable.

The Times

Cop26 corporate sponsors condemn climate summit as ‘mismanaged’

Companies that stumped up millions of pounds to sponsor the Cop26 climate summit have condemned it as “mismanaged” and “very last minute” in a volley of complaints as next month’s event in Glasgow draws near.

The sponsors, which include some of Britain’s biggest companies, have raised formal complaints blaming “very inexperienced” civil servants for delayed decisions, poor communication and a breakdown in relations between the organisers and firms in the run-up to the landmark talks.

The Guardian understands that a letter to the organisers, written by broadcaster Sky and co-signed by senior leaders from other Cop26 sponsors, has raised concerns with them over these and other problems, and followed another co-signed letter in July.

The UK is running its Cop26 presidency from within the Cabinet Office, under the leadership of the former business secretary Alok Sharma, who is the Cop26 president, and the businessman Nigel Topping who was appointed the government’s high-level climate action champion last year. Sponsorship is expected to help defray a policing bill estimated to reach up to £250m.

Alongside Sky, the summit has 10 other major sponsors, including energy giants Hitachi, National Grid, Scottish Power and SSE, US tech titan Microsoft, and FTSE companies GSK, NatWest, Reckitt, Sainsbury’s and Unilever. Unilever has denied signing the letter penned by Sky. Other lower tier “partners” include the car maker Jaguar Land Rover and the furniture retailer Ikea.

One source, employed by a Cop26 sponsor, said that “the biggest frustration” was the lack of information about how the event will run, and the role for its key backers, because important questions have gone unanswered and planning decisions have been delayed.

“They had an extra year to prepare for Cop due to Covid, but it doesn’t feel like this time was used to make better progress. Everything feels very last minute,” the source said.

The Guardian

Targets to decarbonise UK construction called into question

Ambitious UK government targets to decarbonise construction are unlikely to be met because of labour and funding shortages, industry bodies have warned.

Around a third of all the energy in the UK is used in homes, which are in turn responsible for around a fifth of total carbon dioxide emissions, according to the Construction Leadership Council, which is co-chaired by government and industry.

But, despite a series of government announcements aimed at improving housing, with more expected ahead of the UN COP26 climate change conference, there are “serious key questions over who will do the work and who will pay for it”, said Noble Francis, economics director at the Construction Products Association.

The UK has 28m homes, most of which will need improvements if the government is to meet its target of reducing emissions by 78 per cent by 2035 and achieving net zero by 2050.

This requires retrofitting existing homes and building energy-efficient new ones as around three-quarters of England’s housing stock is over 40 years old, according to the Department for Levelling up, Homes and Communities.

The CLC estimates that this will cost £525bn by 2040, including £168bn of government investment, or £18,750 per home.

Even more problematic than the cost is who will do the work and from where the products will be sourced as there are already shortages of key materials and skills in the sector.

The latest Homes Builders Federation quarterly survey of housebuilders reported that nearly 40 per cent of companies considered labour availability to be a severe constraint compared to only 20 per cent in December 2020.

The Department for Business, Energy and Industrial Strategy disputed the figures, pointing out that the Climate Change Committee, an independent statutory body that advises the government, has estimated it will cost around £250bn to improve housing.

BEIS said it was “completely incorrect to state that all UK homes will need retrofitting with energy efficiency measures”. “In fact, nearly 40 per cent of UK homes are above the standard required for net zero, and this figure is continuing to rise,” it added.

The Financial Times

Fear of a cold winter chills energy companies

As small energy suppliers drop like flies, ministers have resolutely refused to step in. “Government will not bail out failed companies, there cannot be a reward for irresponsible management of businesses,” Kwasi Kwarteng, the business secretary, said this month.

Thirteen companies supplying two million households have collapsed in the past two months; some, indeed, are believed to have been amateur operators with questionable practices. Last week Chris O’Shea, the Centrica boss, said that failed companies had offered “cheap, unrealistic deals” and that some had been “caught out after gambling with their customers’ money”. Yet as the nights draw in and temperatures drop, fears are growing that even many well-run companies may not survive the winter.

Emma Pinchbeck, chief executive of Energy UK, the industry association, said: “Obviously, we shouldn’t be bailing out bad companies. However, where we’re at now, it’s the gas spike that’s to blame. Even very well-hedged, well-run companies that have been in the market for a very long time are looking at the situation and are really, really worried.”

Some suppliers have long complained about the price cap, but independent analysts and suppliers alike agree that the extraordinary rise in wholesale prices in recent months has created new and unanticipated problems with its methodology. Ofgem sets the cap using historical wholesale prices, assuming that suppliers purchase energy for standard tariff customers months in advance. By contrast, suppliers usually buy energy for fixed-price tariffs at the start of the contract at prevailing wholesale prices, which are now hundreds of pounds a year higher.

Consumers coming to the end of their fixed contracts, who normally would sign up for new ones, are balking at such expensive “deals” and are choosing to roll on to the standard tariff instead.

According to one industry executive, a supplier might normally hedge on the assumption that 20 per cent of fixed-tariff customers will roll on to the variable tariff. But “in a rising market, more people will now suddenly think, ‘There’s no point buying a £2,000 fixed tariff, the variable is only £1,300.’ You might get 80 to 90 per cent rolling on to the variable that you have not forecast for prior to the steep rise.”

Pinchbeck said that the fragility of the retail sector meant “it’s a risky market for everyone right now. The only ones that we’re talking about being safer, because of their balance sheets, are the five or six big companies at the top and some mid-tier companies that are very well run with a specialist customer base, like pre-payment customers.”

She highlighted third-party estimates “talking about ten suppliers left on the other side of this”, down from about 40 today. “I don’t think it’s unrealistic, given the state of the market. There will be more failures this autumn, for sure. A lot of this is in the government’s gift. Is that the sort of market they think is appropriate? Do they have a sense of how big the cost of that will be for customers when that’s mutualised on all our bills?”

Ofgem has said that the design of the price cap will need to be reviewed in future, but the government has said that it won’t be changing it this winter. A government spokesman said that the price cap was “the best safety net available to protect consumers from instant, excessive price hikes”, adding that there was a “clear, well-rehearsed process in place” to protect customers if suppliers failed.

The Times

Energy bosses race to resurrect gas-fired power stations by Christmas

Energy bosses are vying to bring two mothballed gas-fired power stations back into action as power prices soar.

The Severn Power station in South Wales and Sutton Bridge in Lincolnshire were run by Calon Energy, which went into administration in June 2020.

The two stations were taken out of the generation market but remained under the control of directors Jeff Holder and Scott Magie.

The pair believe the time is now right to get the plants back into the market, with record high gas and power prices amid squeezed supplies.

“We believe it can be economically viable,” said Holder. “Although the price of gas is high the price of power is also high – it’s the difference between the two that matters.”

The pair say they have been “urgently” trying to work with the Government and National Grid to bring them back into the market – although no conversations have yet been had.

They say workers at the plants are making a “herculean effort” and could have the plants back online by Christmas.

The stations could provide 1.7GW of capacity at a time when supplies are stretched due to factors such as maintenance of nuclear plants and a shutdown of coal plants.

Daily Telegraph

Russia will look to ‘rescue’ UK in energy crisis

Russia will try to “come to the rescue” of the UK amid rapidly rising energy costs, says the country’s ambassador Andrei Kelin.

He told Andrew Marr that that if there is an “opportunity” to help the UK, then the country will “do what we can to alleviate difficult conditions which are now being created with the crisis.”

His comments follow three more UK energy firms ceasing trading in the past week including Pure Planet, Colorado Energy and Daligas, which collectively represented 260,000 customers.

The companies were struggling with sharp spikes in wholesale costs from gas shippers following global energy shortages.

Russia provides approximately five percent of the UK’s gas usage, but nearly half of the EU’s natural gas imports.

Kelin also repeated Putin’s statements earlier this week that the country is not withholding gas supplies to Europe for political reasons, such as to speed up approval of Gazprom’s newly built 764-mile Nord Stream 2 pipeline running directly from Russia to Germany.

City AM

Motorists could pay per mile to fill black hole in public finances

Motorists face paying to use Britain’s road network to make up for the loss of revenue from fuel duties as the country moves towards net zero under plans being discussed in government.

Preliminary talks have taken place between ministers over a nationwide road pricing scheme to replace fuel duties that bring about £30 billion a year to the Treasury. Government sources said there was an acceptance across Whitehall that ministers should be “making the case” for road pricing to avoid a black hole in public finances.

However, Downing Street is nervous about the timing of any announcement amid supply chain problems and the energy crunch. The Department of Transport’s decarbonisation strategy, published in the summer, made no mention of road pricing despite early drafts containing a more detailed analysis of the government’s thinking.

Road pricing is also not expected to feature in a string of announcements planned for next week on the government’s net zero strategy in the run-up to the Cop26 climate change conference in Glasgow.

However, government figures said it was a “conversation” that needed to be had with the public.

“As we begin to phase out petrol and diesel cars, you cannot escape from the fact that it is going to have a very substantial impact on the public finances,” they said. “Fuel duty helps to pay for schools, hospitals and other public services which we all care about and unless we want to reduce what we spend on those we need to find an alternative system to raise that revenue. It is absolutely not about raising taxation and most people will understand that.”

Polling from the Social Market Foundation think tank that has been shared with the government suggests there is support for road pricing. When presented as a replacement for road and fuel duties, 39 per cent of people backed the idea, with 26 per cent against it.

The Times

Firm aiming to build £4bn UK ‘gigafactory’ poised for London IPO

Britishvolt, the startup aiming to build the UK’s first “gigafactory” making batteries for electric cars, is poised to choose London over New York for a float next year after being encouraged by the chancellor’s planned reforms to stock market listing rules.

The company, which recently secured investment from global commodities trader Glencore, plans to invest up to £4bn in building a large-scale battery factory by the North Sea in in Northumberland, northeast England, to serve the market for electric vehicles and energy storage.

While it has yet to secure any customers for its batteries, which are in the prototype stage, chairman Peter Rolton said the company was moving closer to a stock market float, with London now the most likely host.

“You know what, we’re a British company and our preference would be the London Stock Exchange,” said Rolton. “It’s the right home for us.”

Britishvolt had been widely expected to list in the US through a merger with a special purpose acquisition company, or Spac, a cash-rich company looking to invest in a promising business.

Rolton said Britishvolt, which is being advised by Barclays, could not “rule anything out”, with several US Spacs understood to be interested in taking the company to market.

But Rolton said proposed changes to UK stock market listing rules, via two reviews commissioned by the chancellor, Rishi Sunak, had helped edge London in front of New York as the most likely home for the company’s plan to go public.

The Guardian

INEOS to invest $2.3bn on green hydrogen production

INEOS, Europe’s largest Hydrogen producer, said on Monday it would invest more than 2 billion euros ($2.3 billion) on electrolysis plants to make zero-carbon green hydrogen across Europe.

The first plants will be built in Norway, Germany and Belgium over the next 10 years, with others planned in the UK and France, the company said in a statement that did not specify the total duration of the investment.

It said it intended to work closely with governments within the European Union, which has made hydrogen a key part of its plan to eliminate greenhouse gas emissions by 2050.

The EU plans to install capacity of 40GW of electrolysers – equipment to produce emissions-free hydrogen using water and renewable power – this decade, up from less than 0.1GW currently.

Reuters

Ford invests £230m to make electric car parts in UK

Ford will spend £230m to turn its Halewood plant in Merseyside into an electric vehicle parts factory, the latest investment in the sector by an overseas carmaker.

The US group’s decision to set up production of electric power units in the UK from 2024 safeguards 500 jobs at the site. It is conditional on £30m of government funding, according to people familiar with the matter.

The move is also a boost for the UK car industry, which is preparing to phase out combustion engine vehicles at the end of this decade.

Ministers have set aside £500m in total to try to convince electric car and battery manufacturers to bring work to the UK to protect the country’s vehicle and component plants as the sector shifts away from petrol and diesel towards battery and hybrid models.

The UK has said it will end the sale of new petrol and diesel cars by 2035, with some hybrids allowed after 2030.

Nissan and Vauxhall owner Stellantis have this year both announced electric investments into their UK plants, while BMW already makes the battery-powered Mini at its Oxford site.

Business secretary Kwasi Kwarteng said Ford’s investment was “further proof that the UK remains one of the best locations in the world for high-quality automotive manufacturing”.

The Financial Times

Utility Week’s weekend press round-up is a curation of articles in the national newspapers relating to the energy and water sector. The views expressed are not those of Utility Week or Faversham House.