NET ZERO BY 2050: 1 PLAN. 2 OBJECTIVES. HOW GREEN GROWTH CAN BUILD THE NORTHERN POWERHOUSE.

23.07.24

Private sector must be ‘lead player’ in building the North’s net zero economy

Decarbonising the North’s industrial sector can be largely funded by the private sector, according to a new report by business-led thinktank the Northern Powerhouse Partnership (NPP). The report builds on new analysis from Cambridge Econometrics which shows that industrial decarbonisation and reducing emissions from real estate are the sectors offering the highest potential private investment leverage overall. The report suggests that for every £1 of public money invested, at least £4 can be generated from the private sector, demonstrating the substantial economic benefits of these initiatives.

This analysis comes as South Yorkshire’s Mayor, Oliver Coppard announced the creation of SY Energy, a partnership with the private sector and academics that will maximise investment, jobs and supply chain development in the area’s leading clean-tech sector.

South Yorkshire has unique strengths in Small Modular Reactors, Hydrogen and Sustainable Aviation and is aiming to become the natural home for these emerging sectors. SY Energy will work to de-risk investment decisions for clean-tech businesses together with the South Yorkshire Mayoral Combined Authority who will help to attract talent and develop targeted skills programme. Businesses will also be supported to grow and build links with other regions and businesses in the UK and across the world.

Across the North, private funding that can be attracted to industrial decarbonisation includes £15bn across the Humber for bioenergy initiatives with £2bn specifically allocated for carbon capture and storage (BECCS) technology at Draxpower station in Selby. This is alongside £5bn towards HyNet’s hydrogen clusters on the Mersey as well as separate further investment on the Tees.

For the overall net zero economy, it is projected that at least £2.65 could be leveraged for every £1 of public money. This includes a greener transport system and renewables such as offshore wind and nuclear energy. The lowest leverage estimated is in land use.

On a project-by-project basis, areas funded by the new wealth fund will need to achieve a leverage ratio of 1:3 ratio, meaning £3 of private investment for every £1 of public funding. NPP also supports the use of Treasury Guarantees by the bank to invest pension fund monies. This would require no up-front government help, making it easier to exceed the leverage ratio and maximise investment impact.

This new report builds on the Northern Powerhouse Independent Economic Review Scenario, which showed investing in net zero could deliver £23bn more in GVA and over 168,000 additional jobs to the Northern economy. Crucially, this would deliver a much-needed boost to the North’s historically sluggish productivity equal to £1,500 per worker.

The report also warns that the North of England, which produces nearly half of the UK’s electricity, and is home to half the country’s most carbon-intensive clusters, is uniquely vulnerable to a botched transition to net zero. The Humber alone represents 40% of the UK’s industrial emissions.

Instead of offshoring our emissions to reach net zero targets artificially, we need a decarbonisation strategy to protect workers in key industries such as steel. In Scunthorpe the future of two blast furnaces were jeopardised by a failure to deliver a carbon capture pipeline sooner, and the North can’t risk similar mistakes in the future.

The report’s other recommendations include:

1. GB Energy to deliver the UK’s first orders for a fleet of small modular reactors (SMRs)
2. Develop our offshore wind and tidal supply chain
3. Push ahead with carbon capture use and storage (CCUS) on the Mersey, Tees and Humber
4. Retrofit domestic and commercial buildings with heat pumps manufactured here
5. Electrify the railways and produce SAF for the aviation sector

Henri Murison, Chief Executive of the Northern Powerhouse Partnership, said:

“The private sector needs to be the lead player in decarbonising our economy and investing in emerging green sectors.

“Billions in private investment is ready to flood into the North’s net zero economy.

“The North of England bore the brunt of the UK’s last rapid de-industrialisation – which took place without a plan to protect workers – which is why we need to stop artificially reducing emissions by moving our heavy industries overseas.

“With the right plan, delivered well, we could use the net zero transition to drive our region’s economy and close the North-South divide for good.”

South Yorkshire Mayor, Oliver Coppard, said:

“South Yorkshire is already home to the largest clean-tech cluster in the UK and at the forefront of nuclear tech, hydrogen and sustainable aviation fuels. We’re leading the way on Small Modular Reactors, with Rols Royce SMR recently selecting South Yorkshire as the home of their new, multi-million pound, SMR facility.

“SY Energy will build on these strengths and make our region the natural home of clean-tech businesses, both nationally and internationally. We’ll do this by bringing the sector together to maximise investment, jobs and supply chain development

“SY Energy will support businesses, working collaboratively to increase manufacturing capacity and capabilities of local supply chains through attracting talent and improving local skills provision. It will also support businesses to grow and expand and help build links across the industry nationally and internationally

“As the report from the Northern Powerhouse Partnership makes clear, the transition to net-zero can be accelerated and help us create bigger and better local economies – if we work together to unlock the potential of the private sector.”

Tracy Brabin, Mayor of West Yorkshire, said:

“Here in West Yorkshire, we’ve invested over £200 million in green projects, working with partners to deliver warmer homes, greener businesses and better public transport options. But to truly deliver at scale and at speed, we must now work in lockstep with the new government and the private sector, to empower our green sectors and revolutionise our region.

“By partnering with businesses and industry, we’ll create a greener, more secure region for future generations”.

Steve Rotheram, Mayor of the Liverpool City Region, said:

“As the UK’s Renewable Energy Coast, the Liverpool City Region has an enormous role to play in developing the net zero economic and driving national growth.

“Our Mersey Tidal Power scheme is the largest tidal energy project in the world, capable of powering up to 1 million homes for more than 120 years. Working hand in hand with national government and the private sector, we can deliver on Great British Energy’s promise to make Britain a clean energy superpower.

“For too long in our history, the North has been left behind when it comes to national investment in infrastructure and innovation. From our green jobs and skills plan and work to develop pioneering projects like HyNet and Glass Futures, I’m confident that we will be front and centre in the Green Industrial Revolution.”

Mark Burton, Lloyds Baking Group Ambassador for Yorkshire, said:

“In the North of England, we are at a critical juncture in advancing our Net Zero economy. Northern businesses have consistently led in innovation and progress, and their steadfast commitment to sustainability not only drives economic growth but also ensures environmental stewardship.

At Lloyds Banking Group, we are proud to support this ambitious strategy, fostering collaboration with businesses and communities to unlock private sector investment and generate sustainable growth. By investment and generate sustainable growth. By investing in emerging sectors like small modular reactors, hydrogen, and sustainable aviation fuels, and supporting key supporting initiatives such as carbon capture and storage and retrofitting buildings, we can transform challenges into opportunities.

“Together with government and industry partners, we are set to build a resilient, sustainable Northern Powerhouse that is not only sustainable but prosperous for generations to come”.

Rolls-Royce SMR’s Government and Corporate Affairs Director, Alastair Evans, said:

“This report demonstrates how infrastructure projects can successfully ‘crowd-in’ investment – a model we have used to establish and grow the Rolls-Royce SMR business.

“Our future domestic growth will be spurred by our success in the Great British Nuclear small modular reactor (SMR) selection process, with an announcement on successful technologies expected before the end of the year. Our success in this selection will unlock enormous potential for investment in the north and beyond.Net Zero Summary ReportNet Zero Summary Report

“Rolls-Royce SMR already has its headquarters and regional office in the North West and recently announced an investment of up to £15+ million in a module development facility in Sheffield, so is already heavily committed to building the North’s net zero economy.”