Environment Archives - WA Communications

Sunak draws battle lines over environment

The Prime Minister has moved to put clear blue water between himself and his predecessors in Number 10 and has broken the political consensus on how to reach net zero.

By delaying deadlines for phasing out new petrol and diesel cars until 2035 as well as scaling back requirements on phasing out new gas boilers, Rishi Sunak is seeking to give voters a clear choice between Tory and Labour environmental policy.

His decision generated favourable headlines in right-of-centre media but has alienated powerful voices in the business lobby.

Marc Woolfson, WA’s head of Public Affairs, draws eight early conclusions from the announcement.

This is a highly political move to create clear dividing lines with the Labour Party on net zero policy – as well as who should pay and when. The government is betting that voters will welcome the removal of costly and inconvenient interventions on home heating and insulation.

The political strategy behind this was to force Labour to take contentious positions and make financial commitments that could damage its economic credibility. At a political level, Number 10 will feel happy that the PM’s statement has landed well with the audiences it was intended for. It has been lauded by right-leaning media. But there are questions over how effective it has been in damaging Labour.

At first blush, Labour appears to have managed to avoid the ‘bear traps’ that have been set for the party, taking a nuanced approach to the various measures announced in Sunak’s speech. It has vowed to reverse the PM’s decision to kick the ban on new petrol and diesel cars down the road. In contrast, it has committed to assessing measures designed to decarbonise heating more fully if it wins the election.

Many of the reasons Sunak gave for implementing the delay echo concerns that many in industry as well as would-be drivers of electric vehicles have already raised – notably on EV charging infrastructure, lack of access to grid connections and an underdeveloped UK battery industrial supply chain. Interesting, then, that powerful voices such as the Ford motor giant and the SMMT industry body have been among the loudest voices protesting against the announcement.

As ever, the devil will be in the detail. Across the economy – particularly in the power sector – reforming grid infrastructure has been the number one concern of businesses for some time. The rhetoric from the Prime Minister gives industry confidence, but there will be a need to see exactly what this means in practice and whether it can bring forward the time it takes to build new infrastructure.

Massive investment is needed to overcome these challenges, which requires confidence and a stable policy framework. Sunak’s announcements, whilst framed as pro-consumer and (at least partly) in line with the concerns of business, are likely to weaken the UK’s attractiveness as a destination for global investors. The potential future economic gains and jobs that have underpinned the political consensus up to now may also be under threat.

Beyond the specific measures, the general mood music will leave a lingering concern amongst businesses that as the election gets closer, Number 10 may feel that it is politically convenient to scale back other elements of net zero policy. Those parts of power or industrial decarbonisation that are seen as particularly costly or disruptive to the public, such as critical electricity pylons to connect new renewables projects, or essential low carbon technologies that come with significant price tags may be particularly vulnerable. Recent scrutiny of a consumer levy to fund new hydrogen projects may offer a glimpse of what is to come.

It’s a useful reminder to business of the importance of looking at new proposals through the lens of consumer affordability. In the run-up to the election, clear evidence of how specific projects and policy ideas deliver best value for money for taxpayers or billpayers will be crucial.

Significant details still need to be fleshed out, following the headline announcement. Labour also has to decide whether to hold onto positions which opponents in Parliament and in the media will portray as anti-consumer. The party must hope that its Industrial Strategy can convince a sceptical public that there are major gains to be made. Whether this will resonate on the doorstep in the heat of an election campaign remains to be seen.

Our analysis of the media coverage of Sunak’s announcement shows that he has won the staunch backing of the popular press and right-wing commentators. While he generated huge media interest (14,000 mentions across traditional media), coverage has been broadly neutral.

The same could not be said for social media, where the great majority of posts are critical.

Join our webinar on Wednesday 27th September, to explore what these recent Net Zero policy changes mean for transport and energy businesses — Chaired by WA Director Angus Hill, with insights from Nathalie Thomas, writer of the FT’s Lex investment column and the paper’s former energy correspondent, and Sam Hall, Director of the Conservative Environment Network.

Date: Wednesday 27th September
Time: 4.00pm – 5.00pm
Location: Zoom Webinar

Please RSVP to events.rsvp@wacomms.co.uk

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Brave new world: Farming solar

Sitting in the audience at a recent agri-tech conference, listening intently to a panel of farmers discussing the future of farming, I was struck by how much of the conversation was centered not on harvest, yields or livestock, but instead on photovoltaic power stations i.e., solar farms.

The Fenland farmers, sitting on acres of expansive flat fields, boasted that photovoltaics left them without hefty energy bills in a cost-of-living crisis. The vertical farmers, growing herbs and salads in soilless conditions inside vast warehouses, insisted that photovoltaics reduce the carbon footprint of their otherwise eye-wateringly energy-intensive manifestation of farming. The eco farmers, down-sizing their productions to reduce the intensity with which they farm their land, claimed that diversifying is more sustainable for them and for the environment. “I truly believe,” one farmer told the conference, “that solar is the future of farming.”

There are clearly some advantages to solar farming agricultural land. It can provide, or contribute to, the farm’s energy usage, which is not to be sniffed at during an energy crisis. Any surplus energy generated can be sold back to the grid, generating crucial revenue for an industry where fewer than half of all farmers make any profit. Solar panels generate consistent yields and can be a more reliable source of income than crops or horticulture, which are increasingly affected by the changing climate and volatile weather conditions. And there is truth to the sustainability argument that reducing intensive cultivation increases future performance.

Farmers argue that they can also generate income by using the land simultaneously, commonly referred to as ‘agrivoltaics’. Sheep can graze underneath solar panels and free-range chickens can roam. Less sun hungry crops can be planted below and among raised photovoltaic panels and some fruit and vegetables can be grown. The lanes in between rows of panels can be used to increase biodiversity by planting pollinator habitat and native vegetation, providing ecosystem services. It sounds idyllic.

I found myself wondering if, given this proclamation for the future, any of them were concerned about the recent appointment of Liz Truss as Prime Minister. The answer was no. But perhaps they should be.

The expansion of solar power emerged as a campaign issue for the final two candidates in the Conservative Party leadership race. Both Liz Truss and Rishi Sunak warned of solar panels filling the UK’s highest quality farmland, joining a chorus of fellow Conservative MPs who have recently described solar projects as perils for rural communities and food supply. Truss told one hustings event “Our fields should be filled [with] our fantastic produce…[they] shouldn’t be full of solar panels, and I will change the rules.”

This idea is not new. For months, backbench Conservative MPs have been speaking out against new ground-mounted solar power projects, often citing local campaigns against projects in their constituencies. Among them is Matt Hancock, a former energy minister, who stood with local campaigners to protest a 2,500-acre solar farm in his constituency.

The government’s energy security strategy, published in April, contained various measures to deal with the UK’s energy crisis and achieve its Net-Zero targets. This included a pledge to increase solar power capacity up to five times by 2035. However, it also included language to appease those sceptical about ground-mounted solar, pledging to “consult on amending planning rules to strengthen policy in favour of development on non-protected land, while ensuring communities continue to have a say and environmental protections remain in place.”

Politics is not the only challenge for farmers to be aware of. Obtaining a sensible cost and timeframe for the connection of a newly constructed solar farm to the National Grid can derail a project. Some estimates place the earliest connection availability for new projects at 2028-2030. Reports of solar farms sitting unused because there isn’t capacity in the grid to transmit the electricity are not uncommon, according to the National Famers’ Union. Where capacity exists, the costs can be prohibitive.

Solar photovoltaics offer a versatile and scalable solution that warrants serious thought as part of the agriculture industry’s ambitions to reach Net Zero. However, solar farms are being refused planning permission in Great Britain at the highest rate in five years and proposals that would have cut £100m off annual electricity bills have been turned down in the past 18 months. Of the 27 proposals declined between 2019 and 2022, 19 are in Conservative constituencies, which are typically in the rural shires of the country. So clearly, the politics matters, and farmers looking to enter the brave new world of solar farming would be wise to pay attention.

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Sustainability Disclosure Requirements: Where do we go from here?

Sustainability Disclosure Requirements have long been on the industry’s radar, supported by wider international actions surrounding the need to combat climate change and protect our environment. However, more recently, clarity around what these requirements entail and how we can appropriately implement them has been notable by its absence – leaving many to wonder, what comes next?

The history of SDR

In July 2021, the Chancellor announced the new Sustainability Disclosure Requirements (SDR) at his Mansion House speech. These requirements were to be focused on combining existing requirements with new ones in an effort to create a new sustainable investment labelling regime which would make it easier for consumers to navigate the investment products available to them.

The SDR were then fleshed out three months later in October, when, just before hosting COP26, the Treasury laid out its roadmap to sustainable investing: Greening Finance.
This detailed what the SDR would need to include, and when; how the SDR should report against the (forthcoming) UK Green Taxonomy; considerations to be made in the day-to-day running of business to ensure responsible stewardship; the potential for ESG data and ratings providers to be brought into the scope of the regulator and Government expectations for asset managers, asset owners and service providers as part of the UK’s transition to net-zero.

Details were “subject to further consideration” and in November, the FCA opened a consultation on SDR and investment labelling, inviting views from the industry at large on the pending obligations. Responses came from far and wide in support of the SDR, with suggestions around labelling, how to make the requirements accessible to consumers, and how the SDR could fit in with other standards.

That consultation was closed in January of this year and the next steps for the SDR were lauded to be in the Queen’s Speech in May. However, while the Treasury stated that it “remained committed to implementing sustainability disclosure requirements” and would “proceed with the necessary legislation in due course”, a reluctance to impose any new regulations on businesses at that time meant that the SDR were notable by their absence in the Financial Services Bill.

This decision was met with notable frustration across the financial industry, with some suggesting that the postponement of the SDRs was a missed opportunity for the UK to reaffirm its position as a global environmental leader as well as denying business the much-needed guidance, clarity and confidence in aligning their processes with a 1.5C future.

Now, the FCA has said it will publish a consultation paper on the sustainability disclosure requirements, including sustainable investment labels, in July, but that formal engagement will not be until Q4 this year.

So, with a moving timeline and a distinct lack of clarity around what the SDR is going to look like, where do we go from here?

Join us

On 30th June, WA will be hosting a panel discussion to explore where the industry needs to go next. We’ll explore the Government’s latest developments of the regulation, the main concerns facing the industry and what effective SDR really look like.

Confirmed panellists

Andrew Death, Deputy Director, Department for Business, Energy and Industrial Strategy

Andrew Death is a Senior Civil Servant in the Department for Business, Energy and Industrial Strategy. He has been a civil servant for 21 years and is currently Deputy Director for audit and corporate reporting. His responsibilities include delivering changes to the corporate reporting framework to implement Government policy of ESG reporting, as well as delivering legislative change to increase competition, choice and resilience in the audit market.

Louisiana Salge, Senior Sustainability Specialist, EQ Investors

Louisiana is responsible for overseeing EQ’s ESG and impact integration strategy across all assets, its stewardship efforts and sustainability data reporting.

Louisiana first joined EQ Investors in 2018 on an internship during her master’s degree programme at Imperial College London, where she conducted research on impact measurement for her thesis. This formed the groundwork for EQ’s award-winning Positive Impact Report, and she joined the firm as a Sustainability Specialist after graduating. Over the last 2 years, Louisiana has developed, and implemented common sustainability standards across all assets managed at EQ. She also leads as a specialist across the three sustainable portfolios managed at EQ: Positive Impact, Future Leaders, Climate Action.

James Alexander, CEO, UK Sustainable Investment and Finance Association
James Alexander joined UKSIF as Chief Executive in October 2020, with a strong vision and mandate to further enhance the organisation’s key role in promoting and expanding sustainable investment and finance in the UK.

James has a background in international climate finance and infrastructure finance as well as many years’ experience in leadership roles in membership organisations. Most recently, James supported global megacities to overcome the substantial barriers to financing climate action as Director of the City Finance Programme at the C40 Cities Climate Leadership Group and Head of the C40 Cities Finance Facility – a project preparation facility he developed, now supporting cities across the world to structure nearly a billion dollars of sustainable infrastructure transactions. James has worked on international climate finance issues at the UN level and supported cities across the world to invest their pensions and reserves more sustainably.

James is Treasurer of Eurosif, the European Sustainable Investment Forum, a member of the Green Technical Advisory Group (GTAG) providing advice to the UK Government on implementing a UK green taxonomy and a member of the Disclosures and Labels Advisory Group (DLAG) providing advice to the FCA on the UK’s SDR and fund labelling regime.

When:
Thursday 30th June,
08:00 arrival for 08:30 start, close at 10:00

Where:
WA Communications,
6th Floor, Artillery House,
11-19 Artillery Row,
London, SW1P 1RT

RSVP AnaNogalesGarcia@wacomms.co.uk

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Gold in the Garbage: Private Equity turns to waste

The waste sector is making headlines in the private equity world as investors are searching the rubbish for opportunities. Admittedly, it is not the most glamorous of industries, but there is good reason for the spiked interest in waste and recycling and it is likely to gain traction in the coming years.

The £1.4 billion bid for waste management company, Biffa, is the latest move in the rush of investment into waste and recycling. This follows moves by KKR to buy Viridor (waste management), Macquarie to buy Beauparc (recycling services) and Ancala to acquire Augean (hazardous waste management). Reconomy (waste broker) was acquired by EMK Capital in 2017 and has since embarked on an aggressive expansion strategy to become one of the sector’s biggest operators.

The pandemic has accelerated this trend, increasing the attractiveness of critical infrastructure and shining a light on its stability in uncertain times. Since then, the regulatory and political direction of travel towards the circular economy has boosted investment appetite.

The government wants us to recycle more, especially as rates have recently plateaued after years of rapid growth. It also wants to tackle the wave of plastic being sent abroad for ‘recycling’, which is landing atop toxic piles of waste in poorly regulated countries. To this end, plans include standardizing waste collections, introducing a deposit scheme to boost recycling of plastic bottles, and imposing ‘polluter pays’ rules that will force packaging makers to incorporate the cost of recycling into their products. According to analysts, the industry will have to invest up to £10 billion to fund the infrastructure needed to meet these commitments. Jacob Hayler, director of the Environmental Services Association, said “it definitely feels like a very dynamic, exciting growth area at the moment, with plenty of opportunity to invest.”

The bio-boom

Companies with a strong portfolio of recycling or energy from waste (EfW) infrastructure are experiencing high profit margins and levels of growth, proving lucrative for private equity backers. The current energy crisis is favouring the domestic supply of energy and the government’s focus on a windfall tax for large oil companies has allowed many EfW plant operators to reap the rewards of higher prices. Sector specialists have explained that many of these plants were modelled on an expected power price of approximately £60 MWh, but current revenues are about £200 MWh, so income has tripled, turning biomass and EfW plants into green cash cows. As a result, large investment firms specializing in infrastructure are circling such projects. For instance, Copenhagen Infrastructure Partners has active investments in SSE’s Slough Multifuel project and is part of a joint venture with FCC Environment for the Lostock EfW plant.

The demand for recycled materials is also growing. London-based PE firm, Exponent, formed the wood recycling and biomass supply specialist, Enva, after acquiring DCC Environmental. Following an acquisition spree, it is now one of the largest wood recycling firms in the UK and supplies a large amount of recycled material to biomass plants which has proved highly lucrative. The site also turns waste into materials for the panel board industry and animal bedding products, the latter for which it won the Recycling & Waste Management Circular Economy Award in 2019.

The green rush

Investors’ interest in waste management is underpinned by the increasing prioritization of ESG in investment decisions, and the swelling of ESG funds globally. Markets such as gas, electricity and water are also more mature and therefore harder to penetrate. The fact that there are only a few large players in the waste space, of which relatively few are listed opportunities, only adds to the excitement. That being said, the market is becoming more sophisticated. Biffa has been silently snapping up smaller players, spending £260 million on 25 deals since 2016. Further consolidation is likely to gather pace as regulations are tightened and operators try to scale up to mitigate supply chain issues; doing so helps reduce costs and carbon footprints.

Investors should be mindful that waste management contracts tend to be short term and volatile, unlike in wind power where long contract terms have helped fuel a construction boost. The sector is also not immune from the cost-of-living crisis, as recessions tend to see households produce less waste. Nevertheless, the political climate is such that investors should be excited about waste management assets that can offer steady returns and can demonstrate green credentials.

To discuss the current policy and regulatory environment for waste, EfW and recycling issues in more detail please email Thea Southwell Reeves on theasouthwellreeves@wacomms.co.uk.

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On the charge: government plans to stimulate the uptake of electric vehicles

Encouraging the uptake of electric vehicles (EV) has become a key part of the government’s plans for a “green industrial revolution” and for meeting its Net Zero targets. The sale of new petrol and diesel cars and vans is due to end by 2030, by which time all new vehicles will be required to have “significant zero emission capability”. By 2035, the government plans that all new vehicles will be zero emission.

WA will shortly be launching consumer polling looking into the priorities of the public in relation to EVs, focusing on the barriers to greater uptake and on charging infrastructure in particular. The government has taken the view that expanding and improving the UK’s network of EV charging points will be key to achieving this transition. It is expected that many will regularly charge their vehicles at home or work, but sufficient provision of public charging points – including rapid charging stations on motorways and kerbside charging for those without a driveway – will be particularly important.

There is considerable regional variation in the availability of charging infrastructure. Only 1,000 of the roughly 6,000 on-street chargers, for example, are outside London, and the total number of chargepoints per head in Yorkshire and the Humber is a quarter of those in London. At motorway and A-road services, there are 145 public charging stations at motorways and A-road services, providing around 300 individual chargers across the UK.

Stimulating investment in charging infrastructure is seen as a priority for regulators and the government

In order to promote the development of charging infrastructure, regulators have been keen to encourage increased investment in the sector. In May 2021, for example, the UK energy regulator Ofcom approved a £300 million investment round for regional network companies across more than 200 low-carbon projects over the next two years. This is expected to include the installation of 1,800 new rapid charging points at motorway service stations and a further 1,750 charging points in towns and cities.

These new installations will go towards the government’s vision for the rapid chargepoint network in England, for which the Department for Transport has set the targets of having:

At least 6 high-powered, open-access chargepoints (150-350 kW capable) at motorway service stations in England by 2023;
Around 2,500 high-powered, open-access chargepoints across England’s motorways and major A roads by 2030; and
Around 6,000 high-powered, open-access chargepoints across England’s motorways and major A roads by 2035.

In pursuit of these targets, the government has allocated £950 million to the Rapid Charge Fund (RCF), designed to “future-proof electrical capacity at motorway and major A road service areas”. While the government has stated that it expects the private sector to deliver chargepoints where they are commercially viable, the RCF may provide a potential source of funds for businesses seeking to expand the charging network in areas where they can make the case for what the government calls “a clear market failure”.

Concerns over competition in the charging sector are likely to inform the government’s approach to regulation as the sector expands

Alongside efforts to stimulate further investment in the sector, the regulatory framework for chargepoints – particularly in relation to ensuring adequate competition – remains a subject of active debate, liable to evolve rapidly as more infrastructure is installed.

In July 2021, the Competition and Markets Authority (CMA) published its report – Building a comprehensive and competitive electric vehicle charging sector that works for all drivers – outlining challenges to effective competition in the market in relation to rolling-out charging along motorways, in remote locations, and on-street. As a result, the CMA recommended a number of “targeted interventions” to “kickstart more investment and unlock competition”.

For chargepoints along motorways, where one chargepoint operator holds a market share of 80%, the CMA found that constraints on the capacity of the electricity grid and long-term exclusive contracts prevent entry by competitors at many sites. It recommended that the government use its commitment to fund upgrades to the grid as a means of opening up competition and facilitating market entry.

For on-street charging, the CMA highlighted that the roll-out is slow, and suggested that local monopolies could arise if the market is left unchecked. It recommended that local authorities play an active role in overseeing the market in their areas, and suggested that they could require fresh powers to ensure that they were adequately equipped to do so.

In response to these recommendations, the government has confirmed that it is considering regulatory changes with a view to enhancing competition in the sector. This includes considering requiring service area operators and large fuel retailers to tender charge point service contracts openly and have a minimum of two – and at some sites more than two – different charge point operators at any particular site. The Department for Transport has also suggested requiring existing providers of charge point services at motorway service areas to make their charge points open-access rather than available only to an exclusive network or group of networks or manufacturers. The Office for Zero Emission vehicles’ consultation on the Future of Transport regulatory review closed in November 2021, and its findings will feed into legislation which may feature in the next Queen’s Speech.

The regulatory environment for chargepoint providers is thus likely to evolve rapidly as the UK’s road charging network expands over the next few years. With changes likely to impact established players in the sector as well as providing potential means of market entry for challenger firms, investors will want to monitor these developments closely in evaluating opportunities for their target or portfolio companies.

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Archive for the ‘Environment’ Category

Sunak draws battle lines over environment

Brave new world: Farming solar

Sustainability Disclosure Requirements: Where do we go from here?

Gold in the Garbage: Private Equity turns to waste

The bio-boom

The green rush

On the charge: government plans to stimulate the uptake of electric vehicles

Stimulating investment in charging infrastructure is seen as a priority for regulators and the government

Concerns over competition in the charging sector are likely to inform the government’s approach to regulation as the sector expands

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