Much has been made in recent days of Labour’s decision to row back on its commitment to spend £28bn to unlock its Green Prosperity Plan. It is true that this fund was always envisaged to do more than invest in renewable energy, and it is of course disappointing to see this funding reduced, but it does not mean that the ambition needs to be downgraded.
Very recent history shows us why. In 2021, the government set a budget for the fourth CfD Allocation Round of £295m. In the two years that followed, that budget unlocked between £20-£25 billion of private investment. Thousands of jobs have been, or will be, created in the development, construction and operation of new wind, solar and marine energy projects and their supply chains, delivering cheap, zero carbon power for decades to come. This demonstrates the relationship between public sector finance and private sector investment, where well-targeted and stable public funding can crowd in much bigger shares of private capital and unlock a huge dividend for UK plc. The vast majority of the investment in our transition to clean power is being provided by the private sector.
The key reason why the CfD can unlock so much private investment is that it is fundamentally good government policy, much envied by other countries and copied by them. And with additional good policies and a mindset focused on delivering new clean energy capacity, Labour can still reach its targets for a zero-carbon power system by 2030. Making the UK a clean energy superpower will never be achieved just by funding - clever policy design by government is needed to unblock the flow of private capital. This will require tackling some sacred cows such as the planning process and the approach to auction designs.
However, public sector funding, co-investment and revenue guarantees by government still have an important role to play, especially in delivering manufacturing and dealing with market failures, such as the gaps in port investment or adequate vessel capacity to deliver offshore wind. Every £1 invested in UK port facilities will generate up to £4.30 of added value to our economy, and by 2040, the floating offshore wind industry alone will support 45,000 jobs. It’s great to see that Labour’s updated plans still include multi-billion pound investments in upgrading ports, creating jobs in clean energy manufacturing, building vital new grid capacity, developing green hydrogen, battery storage and other innovative technologies.
All of the inward investment we have seen in offshore renewable energy has required government co-investment to act as the catalyst that sets in motion the appetite of the private sector to invest, by helping with the start-up costs for these projects. Siemens Gamesa, SeAH Wind, JDR Cables and others have all required funds from government initiatives to land manufacturing opportunities, with private capital then covering the lion’s share of expenditure.
This is an area where Labour can really focus their policy action. Building industrial strategy, which is place-based (especially in coastal communities) and taps into the real innovation challenges in growing and dynamic industries, supported by an interventionist approach to skills development, can bring about a renaissance of industrial growth across the UK. Combine this with transformational policies which unlock the private investment needed to deliver Labour’s green prosperity mission, and together government and industry can deliver a renewable future without the need for a huge taxpayer-backed budget.
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By Dan McGrail, CEO RenewableUK