Comment

Boris Johnson’s ‘green industrial revolution’ is our path to economic and political revival

The PM realises decarbonisation is a bonanza, not a threat, and offers Britain a path to national regeneration

illo

The world is in the midst of an arms race in green technology. Any large industrial state that fails to grasp the nettle on electrification and hydrogen will be left behind.

America and Europe are both about to launch muscular eco-industrial strategies. China is hellbent on dominance of renewables and green hi-tech, not to save the planet but to achieve economic supremacy. We have moved a long way from the era when renewables were the preserve of ecological Leftists. 

It is why Tesla is now worth more than the European car industry, and why Denmark’s wind pioneer Orsted may soon be Europe’s most valuable energy company. Big Money is pulling forward the trend direction of the 2020s, and writing off lost causes.

If it is true that Dominic Cummings mocked the Prime Minister’s “green industrial revolution” as soft economics and Southern virtue-signalling, with little appeal to hard-headed Northerners, it is a relief that Downing Street is now free of his counsel.

Carrie Symonds may have a better grasp of cutting-edge energy finance and Britain’s political sociology.

One thing you will not find on the Humber is many people with a bad word to say for offshore wind. The technology has brought a miraculous regeneration of neglected coastal towns.

Grimsby was home to the world’s biggest fishing fleet as recently as the 1950s. A decade ago it was down to four boats. The vibrant Casbah was a ghost town. The community had hit absolute bottom, portrayed in Sacha Baron’s Cohen’s film Grimsby as a pit of social decay and alcoholic misery.

Today the town is thriving as the operational hub for the vast Hornsea wind farms. Across the river in Hull, a Siemens Gamesa plant makes giant rotor blades in the biggest manufacturing plant built in this country this century. It anchors a reborn shipping industry that services the offshore turbines. 

The great green switch is a “cost” only if you are a member of the economic flat earth society. The Committee on Climate Change should stop conceding this point. 

The GDP multiplier on green investment is turbo-charged, with little leakage into imports.  A study by Oxford University said it could be as high as 2.5 to 3.0 in a depressed economy at a time of near-zero borrowing costs. In short, it is an accelerant.

Goldman Sachs’ Carbonomics summit this month reached the same conclusion: the cost calculus has flipped; going green is now a net gain, or “accretive to economic growth” in banking argot. This is the broad view of high finance and the City.    

Renewable technology has slashed power costs to the point where building anything else ceases to be commercially viable. Electric vehicles will reach that tipping point by 2023 as new models achieve cost parity with petrol and diesel, but with much lower operating costs. Once that happens it is game over for Old Autos that resist. 

Daimler has already said that it will never again design a new combustion engine. Volkswagen is betting everything on electrification. Boris Johnson’s petrol and diesel ban merely ratifies the blindingly obvious. Any car company in the West still planning to produce such cars will be shut down long before 2030 by financial markets. 

Personally, I don’t like everything on Boris Johnson’s ten-point shopping list. It makes no sense to keep building big nuclear plants. “It is lunacy. The markets have already decided that new nuclear is not worth the risk,” says Tom Burke, chairman of E3G.

Costs cannot be brought under control. The strike price for Hinkley Point is £92.50 per megawatt hour (2012 prices) compares to £39.50 for the latest North Sea wind auctions. As EDF’s former finance chief candidly admitted, the purpose of Hinkley was to save the insolvent French nuclear industry and get the British to pay for it. 

There is a national security case for small modular reactors as a way of shoring up the defence industry. There is no commercial case for two 1.6 gigawatt reactors at Sizewell C. Nobody is willing to build them without nosebleed subsidies. 

Much is made of the need for nuclear baseload power,  but this concept is outdated. Mr Burke says nuclear increasingly gets in the way because the imperative is shifting to “flexibility”, requiring near instant response, meshed together with data analytics and digital demand management. 

In all other respects, the Johnson plan is admirable, if a bit light on seed funding at just £8bn of new money. His ambition to turn Britain into the “Saudi Arabia” of offshore wind with 40 gigawatts of capacity makes perfect sense. It exploits Britain’s natural advantage: ideal wind flows over the shallow banks of the North Sea. 

Offshore wind auctions are heading for £30 MW/h with better technology and scale. Britain will soon be producing some of the cheapest zero-carbon power in Europe. Instead of importing 9pc of its electricity through the interconnectors, the UK will become a net exporter. 

The curse of intermittency has essentially been solved. Offshore wind is now highly sophisticated and predictable with a capacity factor reaching 60pc. It can be matched at viable cost by gas peaker plants and soon by entirely new forms of energy storage.

As the Prime Minister says, Highview Power is building the world’s first cryogenic liquid air plant at Trafford. This technology is infinitely scalable and can store back-up power for weeks at a time at remarkably low cost. 

As he also said, Britain’s ITM Power is already generating “green” hydrogen from wind power through electrolysis. The whole world is scrambling to crack this science. The costs are about to fall dramatically. 

Once European, US, and global carbon prices reach $50 or $60 a tonne, it will make sense to turn excess North Sea wind into hydrogen, either to replace imported natural gas for use in peaker plants, or to make synthetic fuels for shipping and aviation, or for home heating, or for industrial use to slash C02 emissions in steel, cement, glass, chemicals, and fertilisers. 

Until then hydrogen will mostly be a “blue” variant from natural gas with carbon capture. That also dovetails elegantly with the UK’s unique geology. 

Carbon capture is suddenly getting cheaper. The oil and gas industry - once arch-sceptics - have embraced the technology with the zeal of the converted. Exxon is working on a fuel cell variant that eliminates the “parasitic load” and promises extraction at a marginal extra cost of $0.02/kWh.  

NetPower in Texas has changed the game by using carbon dioxide as fuel for a ‘oxy-combustion’ that burns natural gas with pure oxygen in a closed-loop process based on British-designed Allam cycle. “We are convinced that we make the cheapest clean hydrogen in the world at 0.57 cents a kilo,” said founder Bill Brown in an interview last month.

This technology has now come home to the UK. NetPower is to build a plant for Europe’s first zero-carbon industrial cluster at Teesside, the heart of Britain’s chemical industry. It will go “negative” by sucking out 1.8 tonnes of carbon for every tonne of biomass burned.

The CO2 will be stored in saline aquifers nearby, but it can equally be injected into disused wells in the North Sea through existing pipelines. Mr Johnson is aiming for a set of carbon capture clusters in Port Talbot, Grangemoth, Merseyside, and the Humber, as well as Teesside, all located in rust bowl spots that need a lift. 

These reservoirs are a lucrative resource. Europe’s industries are short of storage sites. Companies such as HeidelbergCement and ArcelorMittal are signing fat contracts to dispose of their C02 in Norway’s offshore rock. Britain can offer the same service.

“We can price carbon capture lower than almost anybody else. We can sell them negative carbon service,” says Prof Niall MacDowell from Imperial College. We are moving into an era where CCS capacity will be worth more than oil and gas reserves.

Former Energy Secretary Claire Perry said waspishly after being fired that Johnson never really “got” climate change. If so, he does now. 

He grasps the core point that decarbonisation is a bonanza, not a threat. It plays to Britain’s particular geography, to its North Sea know-how, and to its financial skills. It is the path to national economic regeneration.

Whether he intends it or not, his net-zero plan is also a soothing balm for this fractured kingdom. Scotland and Wales are ideologically green. Imagine how much further damage would be done to the union if he were to pursue a toxic Trumpian policy of climate denialism.  

Not all Tories like the born-again green evangelism of Boris Johnson. But on this one his instincts are right.