Budget 2023: Nuclear classed as sustainable to lure investors
Hunt's support for CCS and nuclear is largely welcomed by the sustainable finance sector
The UK’s Chancellor of the Exchequer, Jeremy Hunt, confirmed today that the UK will class nuclear power as “environmentally sustainable” as Rishi Sunak's government looks to encourage investment in the sector.
Hunt also confirmed news that leaked earlier this week, namely a pledge of £20bn towards carbon capture and storage (CCS).
The investment will be in stages of £1bn a year for the next two decades, and is to go towards projects aiming to store 20-30m tonnes of carbon dioxide a year by 2030, equivalent to the emissions of 10-15m cars.
Richard Lum, Co-CIO at Victory Hill Capital Partners, said: "This support for CCS is a healthy step in the right direction, that will help ensure the UK continues to lead the world in applying this technology."
Lum noted that "the government has recognised the need to do more to promote the reuse of the captured emissions, rather than only backing sequestration. Reusing these emissions could boost the economy by supplying certain sectors such as the food and beverage and agriculture industries with valuable and much needed carbon dioxide gas."
Victory Hill’s VH Global Sustainable Energy Opportunities fund is invested in the construction of two combined heat and power plants in Nottinghamshire, UK, which bring together gas-fired engines technology with a CCS system.
In the Budget statement, Hunt said: “Starting with projects from our east coast to Merseyside to north Wales, we are paving the way for CCS everywhere across the UK as we approach 2050.
“We have increased the proportion of electricity generated from renewables from under 10% when we came into office [in 2010] to nearly 40%," the Chancellor said.
"But because the wind doesn't always blow, and the sun doesn't always shine, even under the Conservatives, we will need another critical source of cheap and reliable energy and that is nuclear.”
In step with the EU
This position will put the UK in step with the EU, which earlier controversially put both nuclear power and natural gas within its taxonomy of sustainable activities.
However, national attitudes towards nuclear are divided on the continent, with majority support for the energy source in France and majority opposition in Germany.
In March 2022, then UK Prime Minister Boris Johnson told nuclear industry bosses that the government wants the country to source a quarter of its electricity from nuclear power.
Of the recent reclassification of nuclear, Tom Gilbey, equity research analyst at Quilter Cheviot, said: “Nuclear can be marmite topic when it comes to energy investment, but the Government has nailed its colours to the green mast by classifying it as ‘environmentally sustainable’."
He added: "There tends to be a reluctance from people to have nuclear reactors near where they live but ultimately this source of power is going to be needed if we want to get to net zero. Small modular reactors seem to be the preferred option, both in terms of pleasing residents, but also in getting up to scale quickly.”
Starmer hits back
While Hunt praised his government’s expansion of offshore wind facilities, Leader of the Opposition Keir Starmer hit back with criticism of the Conservative government’s reluctance to expand wind farms onshore, as well as the rollout of the windfall tax against oil and gas companies and claiming the government using the war in Ukraine as a deflection from failed economic policies.
“There are countries which faced the same pandemic, countries which face the same war which didn't ban onshore wind didn't scrap home installation scheme. The war didn't run down our gas storage facilities, [the Conservatives] did, decisions which hurt working people battling the cost of living crisis right now.”, said Starmer.
Returning to the topic of nuclear, Daniel Harman, co-founder of Darksquare Capital, said: “It appears that nuclear is going to be the government’s favoured ‘sustainable’ energy source ahead of wind and solar. I don’t want to get into the debate on efficiency/sustainability between the various sources, but I don’t see why we need to choose one over another.
“It would have been great to see restrictions lifted across the board and allow investment into renewable energy projects on the whole to flow more freely.”