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GIGA growth promises fail to live up to IRA

On 17 November, the UK government announced a £4.5bn funding package for strategic British manufacturing sectors.

Of this, £960m is earmarked for the Green Industries Growth Accelerator (GIGA) fund, which will target the expansion of “strong, home-grown, clean energy supply chains across the UK, including carbon capture, utilisation and storage, electricity networks, hydrogen, nuclear and offshore wind,” according to a Treasury press release.

So far, so good. However, at this stage, not much more information is available on who is eligible and what the impact of that fund might be.

Olga Bezhentseva, a director in Mazars’ Management Consulting, said the expectation was that the funding will be available from 2025 for five years. But that there was as yet no clear mechanism how the funds would be allocated, other than the chancellor’s statement that the money should “help to incentivise private investments and provide certainty to investors.”

Claire Petricca-Riding, Partner at law firm Irwin Mitchell, also found few details , noting that the fund was for green R&D and to “help maximise supply chain benefits and will work in conjunction with the Powering Up Britain Plans – but it is unclear where or how this money will be spent.”

She added that it was also relatively small amount considering the technologies it is seeking to cover all have “a high investment burden, and some are in their early stage development meaning they require a lot of capital expenditure to get grid parity.”

Turbine parts stocked at Port of Dundee. Mhairi Edwards/DCT Media

Giga-what?

Maria Connolly, head of future energy at law firm TLT said that, while details of how the GIGA scheme will work were yet to be confirmed, it was positive news for the low carbon sector. She said it could accelerate development of the targeted technologies by reducing the “current high cost creep between project development and project construction by removing the reliance on imported production and instead utilising a strong UK supply chain.”

Diane Gilpin, CEO of Smart Green Shipping was less positive, however, noting that while such a programme was a step in the right direction, £1bn was insufficient to make much of a difference.

“I hope we will see significantly more capital for climate tech companies from both the public and private purses, so the UK becomes an attractive place to start and grow the businesses critical to global decarbonisation efforts,” she noted.

Chris Pook, government policy director at Nuclear AMRC, said it was very good news that the government was including nuclear as a green industry eligible for funding under the scheme.

On nuclear, Mr Pook said “when taken together with full expensing (see below) for business investment in plant and machinery [the scheme] has the potential to be a very strong, pro-growth package.”

But he said that the funding was overdue, and must survive the next election and a future spending review. “For civil nuclear, the government urgently needs to put in place a programme to support supply chain development to support delivery of the SMR programme, where contracts are due to be signed by Summer 2024… [GIGA] is a good start, but we need a much firmer, longer term commitment for nuclear.”

Given the level of spend and lack of detail, it is hard to see who will benefit and what the return on investment will be.

Claire Petricca-Riding, Partner at Irwin Mitchell

Christophe Williams, CEO of solar innovator, Naked Energy, said the announcement was welcome, and any reliable government funding for renewable infrastructure would increase investor and business confidence. However, it remains incomparable to US and EU plans.

“The GIGA programme is welcome news for the renewable energy industry,” he noted. “But having seen first-hand EU and US incentives, Britain has more work to do if the country is to keep pace with the rest of the world.”

There are notable omissions too. Ash Tate, managing director of Allstar Chargepass, was critical that the EV sector had been left out of the GIGA component – though parts of the sector are included in the wider $4.5bn plan – a further sting to the industry especially given the delay to the ICE ban announced in September.

No Green Deal

Ms Petricca-Riding said many billions were required to facilitate the energy transition in the UK, and the US Inflation Reduction Act and the EU Green Deal are far more ambitious.

“As such, overall, given the level of spend and lack of detail, it is hard to see who will benefit and what the return on investment will be.”

Together, the EU and US are putting forward almost €1 trillion to accelerate the clean energy economy, noted Ms Bezhentseva, who added that on 28 November at COP 28, UAE banks pledged a further $270bn in green finance. “Clearly, there is a lot of competition between the world governments to drive the net-zero targets and provide energy security,” but Britain is failing to match the high numbers available elsewhere.

Getting the UK back on track with its peers won’t be cheap, especially when we’re playing catch up. We are seeing the cost of inaction of previous decades today.

Christophe Williams, CEO of solar firm Naked Energy

Mr Williams said that the UK needed to keep pace with the US and Europe. “The energy transition provides a huge opportunity to build domestic supply chains and revitalise national industries… The government are doing some things right such as the £1.2bn Public Sector Decarbonisation Scheme and the Renewable Heat Initiative.”

But red tape and complexity for businesses were often too much, he added, and the money too little, leaving them focusing on short term cost savings rather than long-term carbon savings.

“Getting the UK back on track with its peers won’t be cheap, especially when we’re playing catch up. We are seeing the cost of inaction of previous decades today. We can’t let it happen again,” he said.

Other support

Ms Connelly said that, comparisons aside, November had been a “month of positive shifts in policy and support for renewable generation and green infrastructure projects” – from the relaxation of planning laws to support low carbon energy projects and EV charging points, to the development of a UK battery supply chain and the £4.5bn funding package.

She said the funds would increase investment in eight manufacturing sectors across the UK, with over £2bn earmarked for the automotive industry – which could help EVs and EV charging infrastructure.

Indeed, it may be other measures which offer greater returns for SMEs in the low-carbon space.

Full expensing was also extended indefinitely in the budget and remains uncapped, which should have a positive impact. The measure is designed to stimulate business investment in plant and machinery by increasing the tax relief available in the accounting period the expenditure is incurred – up to 2026, now indefinite.

“By removing the 2026 end date for full expensing, the government will provide better certainty to businesses and encourage long-term investments. It is also positive as making it specific to plant and machinery will help to encourage investments in infrastructure, aligning it with the purpose of the GIGA,” noted Ms Bezhentseva.

RenewableUK chief executive Dan McGrail also concurred that long-term certainty over this tax relief offering would help inward investment in both clean energy and manufacturing.

However, Ms Gilpin, of Smart Green Shipping, said that while there had been some positive measures in November, and although the UK retains major climate tech strengths – including best-in-class lawyers and financiers, and strong demand for green technologies from potential customers – it also holds onto “painfully big gaps”.

“The UK lacks the ability to help early-stage companies scale, and this covers everything from manufacturing capabilities and funding to skills and attracting the best talent. We need joined-up thinking and cross-sector integration to really help the UK’s green economy,” she said.

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