Foresights

Two-minute precis 

• The UK must break the logjam of new renewable projects wanting to connect to the National Grid (or simply “the grid”) as soon as possible to accelerate the UK’s transition to net-zero.
• There are so many new renewable projects applying for grid connections, the grid cannot keep up.
  
• The National Grid was built in the 1930s and 1940s when one or two fossil fuel powered power stations requested a connection each year.
• Industry sources estimate there are over 1,000 projects, worth more than £200 billion and with a total capacity of 176GW, in the queue to the connect to the grid.
• Some new solar and wind sites have taken up to 10 to 15 years to be connected to the grid. 
• The UK currently has a 2035 target for 100 per cent of its electricity to be produced without carbon emissions.
• The UK has an overarching target for its economy to be “net-zero” by 2050.
• Climate campaigners, green investors and renewable energy companies alike worry it could threaten UK climate targets.
• With any Labour lead government in 2024 pledging to “double onshore wind; triple onshore solar; quadruple offshore wind” and deploy the UK’s floating wind also, this pressure on the grid to connect more renewable assets is only set to increase. 
• The National Grid acknowledges the problem but says fundamental reform is needed.

Full length blog 

In the UK, there is a logjam of renewable energy projects seeking connection to the National Grid – the system of wires and transformers that transports electricity from where it is generated to where it is needed.  

The National Grid owns and operates both the electricity and natural gas transmission networks in the UK. 

The National Grid was privatised by the Thatcher Government in 1990 so that it is now a public limited company (plc).  This means it is a company listed on the stock exchange(s).  Before 1990 both the generation and transmission activities in England and Wales were under the responsibility of the Central Electricity Generating Board (CEGB).  

Wikipedia accurately reports “the National Grid plc is one of the largest investor-owned utility companies in the world; it has a primary listing on the London Stock Exchange where it is a constituent of the FTSE 100 Index, and a secondary listing in the form of its American depositary receipts on the New York Stock Exchange.”

The grid was built at a time when new connections came from a small number of large fossil fuel generators, commencing operation in 1935.  As the National Grid’s website records, the UK’s national electricity grid is “the world’s first integrated national grid”.  For the first time anywhere in the world, the National Grid consisted of seven linked regional grids covering the UK, rather than there being a myriad of small power stations around the country, near cities, towns and villages, to supply them with electricity on local grids. These regional grids were centred around large population areas of Birmingham, Bristol, Glasgow, Leeds, London, Manchester and Newcastle.  The National Grid made the supply of electricity in the UK more stable and cheaper.  

Post-World War Two, the National Grid was largely powered by a network of coal fired power stations located in and around the UK coalfields i.e., South Wales, Nottinghamshire, South Yorkshire, the North East and Scotland. Gas fired power stations were added.  In 1960, 90 per cent of the UK’s electricity was powered by coal.  The UK’s first windfarm, located on the windy Cornish coast, was connected to the grid in 1991.  Fast forward to 2019 and for the first-time low carbon electricity generation in the UK overtook electricity generation from fossil fuels in the period January to March 2019.

In the early evening of Monday 9 October 2023, official figures from the National Grid show the UK’s energy generation mix is made up of 3.9 per cent from coal fired generation; 51.4 per cent from gas; 3.2 per cent from solar; 6.7 per cent from wind; 2.8 per cent from hydro-electric; 12.7 per cent from nuclear; 6.9 per cent from biomass; 7.9 per cent from the various interconnectors (electricity cables under the sea that can import and export electricity to / from the UK) with Belgium, France, Ireland, Netherlands and Norway and 4.6 per cent from pumped storage.  

A crucial issue for the National Grid is how you get the electricity from where it is generated to where it needs to be. The UK’s windiest spots are not currently next to the areas with the highest population density. New grid connections need to move the electricity from the wind, solar farms and storage systems to the Grid which then supplies it to the end user. This is a massive infrastructure upgrade. New substations, overhead lines, underground cables are just some structures that have to be built beside new energy generating developments.  Industry sources estimate there are over 1,000 projects, worth more than £200 billion and with a total capacity of 176GW, in the queue to be connected to the grid.  Reaching the 2050 net-zero target requires all these renewable projects, and more, to be connected to the grid as soon as possible.  

As I write this blog on the evening of Monday 9 October 2023, I am attending the Labour Party Annual Conference in Liverpool.  Earlier today the Conference passed a motion re-committing the Party to re-nationalising the UK energy system – including the National Grid. The Shadow Secretary of State for Business and Trade, Jonathan Reynolds MP, immediately said Labour Party policy would not change and they “would not be nationalising the UK electricity system” if it forms a government after the next UK General Election.

With any Labour lead government in 2024 pledging to “double onshore wind; triple onshore solar; quadruple offshore wind” and deploy the UK’s floating wind also, as announced by Rt Hon Ed Miliband MP, Shadow Secretary of State of Climate Change and Net Zero, at the Labour Conference 2023, this pressure on the grid to connect more renewable assets is only set to increase.

So, what can be done to break the logjam of renewable projects wanting to connect to the grid?  

In fairness, the National Grid, which manages the system, acknowledges the problem but says fundamental reform is needed.

Without getting too much into the detail around the grid connection bid process for new power plants, and into the technical detail around battery storage and peak demand management and black start capability, in simple terms, Ministers (of whatever colour in the next Government) need to amend energy legislation to give the UK energy regulator, Ofgem, a new laser focus and associated powers to put achieving net-zero at the heart of every decision it takes. This would unlock vital green investment in our electricity network and help the UK get to net-zero as soon as possible.  

Update Tuesday 10 October 2023, 16.30hrs: If you thought this was a bit of a niche, rather “techy” issue, well maybe it is.  But it is important and as if to underline that point Rt Hon Sir Keir Starmer MP, Leader of HM Opposition, mentioned it in his speech to 2023 Labour Conference a little earlier, here in Liverpool.  He said towards the end of his speech “[We need] a new effort to re-wire Britain. The National Grid moving faster – a lot faster. Laying the cables our future prosperity needs.”

So perhaps reform of the grid and Ofgem will be a priority of a future Labour Government?

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Growing up in Doncaster in the heart of the South Yorkshire coalfield in the 1970s and 1980s, Chris Kelsey, Director, I&I, has followed the UK energy debate keenly ever since the 1984 miners’ strike.   

New research shows that global corporations intend to invest 22% more year-on-year in getting their businesses to Net Zero, on average

UK companies plan the largest year-on-year increase in spending to cut carbon emissions, followed by Australian and Singaporean businesses

Study of largest 1320 companies by revenue across the Americas, EMEA, and APAC 

London, Sydney – The world’s largest companies plan to boost year-on-year spending to cut their carbon emissions by an average of 22%, according to new research which is published following several months of extreme weather events in many countries around the globe. 

Despite the challenging global economic conditions, corporations in every region said they were intending to increase their Net Zero investments. UK firms plan the largest investment increase globally at 36%, followed by a 32% hike by Australian businesses. That’s according to new research conducted by global business financial research firm East & Partners and communications consultancy Impact & Influence.

Companies in the world’s most carbon emitting countries also planned to spend more to work towards Net Zero, with US-based firms allocating a 28% investment increase, followed by increases of 18% and 12% respectively from Chinese and Indian businesses. 

Kenyan companies planned the lowest average increase in Net Zero spending among the markets included in the research, at 7.7%, suggesting that Africa may be being left behind in terms of access to sustainable finance. Firms based in the United Arab Emirates, which is co-hosting COP28 this November and December, reported that they were going to spend an average of 21% more year-on-year on cutting carbon emissions.  

Companies in carbon intensive industries plan to increase their Net Zero spending the most: manufacturing (26.9%), logistics & transport (24.3%), resources & mining (22%).

Just under a half (44.5%) of businesses plan to access this Net Zero finance from their current primary transaction bank, with 17.7% reporting that they plan to use a different provider than their main lender, and a similar number (18%) saying that they intend to use a specialist sustainability lender.

Paul Dowling, Co-Founder and Principal Analyst of East & Partners, said: “It’s encouraging that the world’s largest companies are planning to dial up their capital investment to reduce their carbon emissions, which will be critical to combating global climate change. 

“Most leading transaction banks are targeting Net Zero financing as a growth revenue stream, and they account for just under half of this large corporate lending market, but at the same time alternative sustainable finance providers are rapidly capturing market share.” 

Rishi Bhattacharya, CEO and Founder of Impact & Influence, commented: “Companies are putting their money where their mouth is in terms of boosting investment to get to Net Zero. This surge in spending will be driven by a host of different factors including compelling climate change science, industry, business and supply chain risks, investor appetite,  public and political pressure – and, of course, commercial opportunity. 

“Whatever their motivations, action and innovation by these businesses will be pivotal to protecting the planet.”

Specialist sustainability lenders have made stronger inroads into the UK, US and Japanese Net Zero finance markets, with 27.4%, 26.3% and 26.1% of companies based respectively in those countries expecting to use their services. Accessing sustainable finance via capital markets is most likely in the US (22.1%), followed by Australia (20.8%). 

Research fieldwork was executed over the two-week period ending 14 August 2023 with the individual responsible for the business banking relationship. Interviews were conducted on a direct basis over Teams and/or Zoom with the top revenue-ranked corporates in each of the following:

Americas: Brazil, Canada, USA

Asia Pacific: Australia, China, India, Japan, Singapore

Europe: France, Germany, UK

Middle East and Africa: Kenya, Saudi Arabia, UAE 

Total corporates interviewed: 1320

• By announcing U-turns on key green targets, Rishi Sunak, effectively fired the starting pistol on the next general election

• After losing the Uxbridge by-election ostensibly as a result of Labour Mayor of London, Sadiq Khan’s extension of the Ultra Lower Emission Zone to the suburbs of London, the Labour Leadership is nervous, but is holding the line for now
  

• Will this move be a key differentiator between the parties and indeed different generations of voters?

On Wednesday 20 September, in a speech to assembled press and Conservative MPs, in the Downing Street briefing room, UK Prime Minister and Conservative Party Leader, Rt Hon Rishi Sunak MP, announced what he called “a new approach to net-zero”. 

He said: “…to give us more time to prepare, we’re easing the transition to electric vehicles on our roads and heat pumps in our homes.

That means you’ll still be able to buy new petrol and diesel cars and vans until 2035, in line with countries like Germany and France.”

The U-turns also included the scrapping of energy efficiency regulations for landlords.

On Saturday 23 September the BBC revealed the energy taskforce, whose key objective was to speed up home insulation and boiler upgrades has also been disbanded by the Prime Minister.  The group - which included the chair of the National Infrastructure Commission Sir John Armitt and other leading experts - was only launched in March 2023.

The loosening of these measures are major policy shifts in the Sunak government’s climate commitments and shatters the cross-party political consensus around getting to net-zero as soon as possible and the 2030 targets for the ban on the sale of new petrol and diesel cars and vans and the phasing out of gas boilers.

The announcement prompted furious condemnation from the automobile and energy industries.  Some senior Tories including Sir Simon Clarke MP, Con, Middlesbrough South East Cleveland and former Chief Secretary to the Treasury; Rt Hon Lord Deben [John Gummer], Chairman of the UK's independent Committee on Climate Change, and former PM and Tory Leader, Rt Hon Boris Johnson, criticised the move.  Johnson warned his successor he “cannot afford to falter now” because heaping uncertainty on businesses could drive up prices for British families.

The move was also met with despair by climate scientists and environmental experts who said it would cost consumers more in the long run and threaten the UK’s global leadership on the issue. The former US vice-president Al Gore said Sunak was “doing the wrong thing”.

So why is Sunak doing this? 

The short answer is votes!  The long answer is that because the Conservative Party is fairly consistently around 20 points behind in the polls Sunak has to try to regain the political initiative and start narrowing that lead if he has any chance of winning the next general election.  The next general election has to be before early January 2025, and most political commentators predict it will be in either the spring or summer 2024, if the economy continues to pick up and inflation fall.  Spring 2024 is only a few short months away.  Politicians need to be in power to do things and change things. 

The Tories unexpectedly won the Uxbridge by-election on Thursday 20 July 2023.  Labour turned over a bigger majority to win the Selby by-election on the same day.  So why did it lose in Uxbridge?  The answer given on the doorstep by the voters to canvassers of all parties was in effect: We don’t like parts of Uxbridge being subject to Labour London Mayor’s ultra-low emission zone, which means we will have to pay more to drive our cars around the area to go to work, take our kids to school, do our shopping, go to medical appointments, visit relatives etc.  Essentially the ULEZ means that if your vehicle doesn't meet the ULEZ emissions standards and is not exempt, drivers need to pay a £12.50 daily charge to drive within the zone.  The standards are vehicles have to be Euro 4 for petrol cars and vans.  Euro 4 standards were rolled out in 2005/6.  Diesel vehicles have to be Euro 6.  Euro 6 standards came in in 2014.  So if your car or van is older than these standards (it’s an effective age limit) you have to pay or trade it in for a new model which is not cheap.  ULEZ charges apply to cars, motorcycles, vans and specialist vehicles (up to and including 3.5 tonnes) and minibuses (up to and including 5 tonnes).

It seems that UK voters, (and they have been fairly consistent on this over the last 100 years or so), do not lend their votes to parties promising to raise their taxes; introduce new ones or force them to buy things like new cars or boilers.  I guess this goes double in a cost-of-living crisis / relatively high inflationary environment. 

Crudely, if UK voters did like voting for parties offering better public services funded by higher taxes, the UK would have had more than only four spells of Labour in government in the last century. I know it is not a fashionable sentiment, but I do sometimes feel sorry for UK politicians. Voters seem to demand high level public services and green policies, and associated clean air, beaches, rivers and seas on a par with those in Scandinavia, paid for the low levels of taxation seen in the US. A difficult circle to square.  I guess the UK does lie between Scandinavia and the USA on the map.

In addition to the politics around pure taxation / increased costs, mixed in with ULEZ is the politics around the US / UK love affair with cars.  In the 1980s, the then PM, Margaret Thatcher, espoused "the great car-owning democracy," and asserted that "a man who, beyond the age of 26, finds himself on a bus can count himself as a failure."  Ironic in the country that invented the train.

Cars and car ads offer the illusions of freedom – driving down empty roads with wonderful scenery on either side.  The reality of course is that most of UK drivers, particularly those who commute to work in cities, sit in a metal box, moving slowly in heavy traffic.  But for the socially awkward British, cars at least allow the driver to have their own space and can play their own music.   It is a brave politician to threaten UK voters’ cars…

So Rishi Sunak’s new political advisors, Jamie Njoku-Goodwin and Adam Atashzai are sharpening Sunak’s political narrative and the dividing lines between the Tories and Labour.  They are putting Labour on the spot…

How will Labour respond?  Will Labour commit to U-turning on the U-turns?

In response, Sir Keir Starmer’s Labour Party has pledged to reinstate the 2030 deadline for the ban on the sale of new petrol and diesel cars if it wins the next election.

Steve Reed MP, Labour, Croydon North and the Party’s relatively new Shadow Secretary of State for the Environment and Rural Affairs, toured the news studios in late afternoon on Wednesday 20 September after Sunak’s press briefing.  He said the party would reverse Rishi Sunak’s decision to delay the policy for five years – so back to 2030. 

However, reflecting the Party’s nervousness on this, Sir Keir Starmer chose not to directly address the announcement, or openly criticise the Prime Minister’s speech.  He dodged addressing the issue head on, instead posting a message about showing “the leadership needed to secure Britain’s future”.  He is mindful of being painted by the Tories and the Tory press (which is in the majority of course) as the Leader that will tax you more and heap additional costs on you for uncertain gains, as we head to the next general election.  Memories of the Party’s defeats in 1983, 1987, 1992, 2010, 2015, 2017 and 2019 when the Party and its Leader were painted as exactly this, are burned in the Party’s soul. 

Sir Keir instead affirmed “My mission driven government will provide the stability business needs, to attract investment, create jobs, and grow our economy for working people.”

Labour strategists want to give themselves “wriggle room”.  They are worried that older voters, who perhaps not unnaturally take a shorter-term view of politics, taxes and the environment, will be quietly attracted to Sunak’s change in stance and tone.  Older voters tend to get out and vote more than younger voters.  And the new voter ID rules mean that older voters do not need to show any form of ID, but younger ones do.  Many argue this is entrenching an older voter bias in the UK electoral system. Labour strategists know that it needs older and younger voters’ votes if it is to form, or at least lead, the next UK government. 

Tory strategists may have in mind such clear blue water, and the resultant Labour hesitancy, may drive younger voters into the arms of the Lib Dems and Green Party.  This will split the “progressive” left of centre vote and allow the Tories to squeak home in a number of seats and mean they hang onto power.  Some parallels with 1992 here…..

As we stated in our blog, before the Labour Party Conference last year, “Labour just might win the next election…..IF it seizes the net-zero agenda”: “Labour MPs, alongside Conservative MPs and others, voted in 2019, to commit the UK to a legally binding target of net-zero carbon emissions by 2050.  But in fairness the Labour Party has long campaigned for a more ambitious approach to climate action and net-zero.  Since the 2019 general election Labour has stated a “significant majority” of carbon emissions would need to be eradicated by 2030 to hit net-zero by 2050 and tackle climate change.  Labour Leader, Keir Starmer, said [then]: “We will not be distracted by the siren calls …. that say economic growth and net-zero do not go together... A plan for net-zero needs growth. A plan for growth needs net-zero”.”

Is that still Starmer’s view?  Post Uxbridge I am not sure.  No doubt he is not sure.  It seems the Party is holding the line… for now.  But it is nervous.  After four straight consecutive defeats it is keen to avoid a fifth. 

Perhaps the Labour Leader will be forced by media questions to clarify its position on this and other issues during Party Conference season 2023: The Conservative Party Conference 2023 runs from Sunday 1 October to Wednesday 4 October in Manchester.  The Labour Party Conference runs from Sunday 8 October to Wednesday 11 October in Liverpool. 

The Rutherglen by-election, in South Lanarkshire, in Scotland, immediately after the Tory Party Conference, but before the Labour one, on Thursday 5 October, will provide Labour and Tory election strategists actual voting data, in addition to polling data, about where the Parties are.  Perhaps after that we will see Labour clarify its policy positions around net-zero and the environment. 

Does it want to be on the right side of history?  Will it take the long-term view?  Will it show leadership and not just make tactical moves?  Is a 20-point opinion poll lead a big enough cushion to be bold and stick to its guns on this?  Voters of all ages are watching.

Writing this blog I was reminded of the native American saying: “When the last tree has been cut down, the last fish caught, the last river poisoned, only then will we realise that one cannot eat money.”  But to bring in policies to protect the environment and get to net-zero as soon as possible, you have to be in power.     

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Chris Kelsey is a Director at I&I. He worked for Hugh Bayley (Labour MP for City of York) between 1992 to 1995; Rt Hon Lord [Frank] Field of Birkenhead (then Labour MP for Birkenhead and Minister for Welfare Reform) from 1995 to 1998; was Helen Goodman MP’s election agent in 2017 in Bishop Auckland and worked for the Labour Party itself from 2011 to 2014.

I&I will have a presence at this year’s Annual Labour Party Conference in October in Liverpool. It will also have a presence at this year’s Annual Liberal Democrat and Conservative Conferences.  

Prior to 2018 I personally attended every Labour Party Annual Conference since 1992.  I attended the Labour Party Conference in 2022 on behalf of I&I and its awesome clients.

The clock is ticking.

Not only to COP28 which starts in Dubai, a hundred days from now, but also the time there is to take meaningful action to prevent a complete overshoot of global warming of 1.5 °C above pre-industrial levels. And to the point where it becomes irreversible.

There have been dire warnings – one after the other – of climate-related events in the last few months. Wildfires, scorching temperatures, floods. Out of season. Out of control.

Yet against this backdrop, there is something both interesting and worrying going on. It has actually been bubbling along underneath the surface for some time now. This is the well organised – and therefore probably well-funded – lobbying and influencing against Net Zero. 

Some of it is on the grounds of cost of the climate transition – for instance the heated debate about the Ultra Low Emission Zone (ULEZ) in London; some stirred up by the protests of the Just Stop Oil movement; and some, which is circulating among the right in the US, is equating climate “hysteria” with socialism.

 
Essentially it is getting nasty. No pun intended, but it is seeking to polarise the debate. Like so much of political discourse within the last decade, it is more about division than solutions. More about heat than light.

Along with our colleagues at East & Partners, we at I&I recently undertook research looking at what themes of COP28 were resonating among corporates globally. The theme of “Keeping 1.5 ºC Alive” from COP26 came bottom of the list.

It struck me that many corporates were already pricing in an overshoot. Corporates were more concerned about having a stronger voice in measures to tackle climate change. They wanted to focus on more practical solutions such as climate finance reform, innovation and technology.

Generally, the fighting happens at the poles. They are the ones that shout the loudest. But in this mother of all scraps, it is going to be the more measured majority that will have to be the agents of change. From business, to governments, to citizens.

We have to double down on focusing on action and solutions. And this is where communications – and Impact & Influence - has a role to play in showcasing and accelerating the pace of change for those individuals, organisations and companies that are pushing for a fair and equitable climate transition.

We should not be under any illusions that this is going to be the fight of our lives. And for the measured majority there is a growing sense that we will have to adapt the communications techniques of those at the poles of this debate. In this sense the gloves are coming off.

Photo by Markus Spiske: https://www.pexels.com/photo/climate-road-landscape-people-2990650/