SSE CEO: Is this finally a watershed moment for the UK’s net zero ambition?

Alistair Phillips-Davies says Boris Johnson’s green recovery pledges are “music to our ears”. However, he warns that Ofgem’s approach to the next round of price controls “risks regulating the networks in austerity mode” and undermining the government’s commitments.

The package of measures announced by Boris Johnson to “Build Back Greener” marks an important shift from green recovery rhetoric to meaningful action that will unlock vital investment in renewables and the UK supply chain.

The logic behind a green recovery is irresistible – investment in low-carbon infrastructure will spur economic recovery, creating jobs and levelling up, while tackling climate change and aiding progress towards the UK’s binding target to reach net zero emissions by 2050.

It’s a win-win that’s hard to argue with. The question has been how to deliver it and in the PM’s speech yesterday (6 September) we saw the makings of a plan; as one of the UK’s biggest investors in renewables this is music to our ears.

We’ve already set out plans to invest £7.5 billion in green infrastructure over the next five years, including developing, with Equinor, the world’s largest offshore wind farm at Dogger Bank.

The huge reduction seen in the cost of offshore wind is a real international success story for the UK – made possible by clear, long-term policy signals from government and mechanisms that give companies the confidence to invest at reasonable returns.

With our natural resources, the PM is absolutely right the UK has potential to be a world leader or, as he put it, “the Saudi Arabia of wind”. So, it was extremely encouraging to see a bold commitment from government to a clear and ambitious target of 40GW of offshore wind by 2030 – something we’ve been calling for. After all, hitting our 2050 targets will require a trebling of our current wind capacity. We will need to make sure the design of the market encourages clean electricity deployment at this scale.

But we want to create green UK jobs, not just green UK electricity. So perhaps more exciting is the commitment to invest £160 million in improving the UK’s supply chain through upgrades to ports and infrastructure. If we’re to reap the economic benefits then we need to build components like turbine blades and towers here in the UK – at a cost which is globally competitive and but still affordable to billpayers.

With support like this from government to get the right infrastructure built, projects like Dogger Bank can provide the orders that help create new, skilled jobs and revitalise industrial regions like the Humber, Teesside and Nigg. The alternative is that these facilities – and consequently the orders and the jobs – are forced overseas.

Clearly a green industrial revolution is about more than just offshore wind and we hope to see more ambitious long-term policy signals in the rest of the PM’s ten-point plan.

The UK has a natural competitive advantage to lead the world on carbon capture and storage, making use of our unique access to offshore gas storage facilities in the North Sea and creating low-carbon jobs to replace those that will be lost as oil and gas is phased out.

Providing vital flexible power to balance the natural variability of renewable electricity, helping to decarbonise industrial processes and paving the way for a hydrogen economy in trickier areas like transport and heat.

But the huge increases in renewable energy and changes in the way energy is produced, transported and consumed, will also require massive investment in our network infrastructure to accommodate it.

Unfortunately, while government has been clear about its priorities, Ofgem risks regulating the networks in austerity mode, removing much-needed and well-justified investment out of transmission business plans and offering returns far lower than any comparable market anywhere in the world.

We’re hopeful that the strong signal from government about the need to unlock low-carbon investment will help us get to a more sensible place in December’s final determination so that we can get on with building the infrastructure, and creating the jobs, this country needs – rather than wasting time on a costly CMA review, as the water sector has done.

These are exciting opportunities for the UK at a time when the eyes of the world will be on us as we prepare to host the next big UN climate summit, COP26, in Glasgow next year. Now, more than ever, government, industry and the regulator need to work together towards our shared objective of delivering net zero and creating jobs at lowest cost.

Find out more about the utilities sector’s plans to Build Back Better in our dedicated series, culminating in the Build Back Better Forum on 20-21 October