UK
Trade groups demand Ofgem tackle energy brokers ‘ripping off’ small firms


Jillian Ambrose 

Energy correspondent

THE GUARDIAN
Sun, 23 July 2023 

Photograph: Stefan Rousseau/PA

A coalition representing 1m small businesses is urging the energy regulator to crack down on the rogue energy brokers who rip off firms, charities, care homes and faith groups by piling billions of pounds in hidden commission fees on to bills.

The business groups have written to Ofgem demanding it force gas and electricity suppliers to disclose how much they are paying the intermediaries who market deals on their behalf.

The trade associations claim that these secret commissions have inflated energy bills and compounded the cost crisis facing the small business sector, which employs almost 13 million people across the UK.

“We cannot afford to wait for further reviews on this issue,” said the letter. “We have the support of some of the biggest voices representing the UK’s most hard-hit sectors. If you continue to fail the business community by allowing this exploitation to continue, we will raise this direct with government.”

The letter, seen by the Guardian, has been signed by chief executives from UKHospitality, Care England, the British Retail Consortium, the Federation of Independent Retailers (FIR), the Association of Convenience Stores, British Independent Retailers’ Association, the Independent Care Group and the National Council for Voluntary Organisations.

Muntazir Dipoti, the national president of the FIR, said many of its members were struggling to stay in business.

“It is, therefore, critical that Ofgem takes action against these hidden charges to prevent even more retailers being left severely out of pocket,” he said.

The Confederation of British Metalforming wrote a letter earlier this year to the energy security secretary, Grant Shapps, seen by the Guardian, which described the situation as the “biggest mis-selling scandal since PPI [payment protection insurance]”.

It follows warnings from the Federation of Small Businesses and the British Chambers of Commerce that about a quarter of the UK’s small businesses are now locked into poor value energy deals that were struck when gas and electricity prices were at their peak at the end of last summer.

Almost a third of companies with a business energy supply contract use a broker to secure it, but unlike the intermediaries who market mortgages or insurance deals these energy middlemen are largely unregulated.

Lawyers at Harcus Parker and Leigh Day, which have launched class action lawsuits against energy suppliers, believe that in some cases secret broker commissions may have doubled small business energy bills. They have said that small businesses may have the right to claim back up to £2bn in hidden commissions.

Damon Harcus, who founded Harcus Parker, said: “The malpractice is so widespread, and it’s coming to light at a time when fuel costs are often what determines whether a company can survive. We have 5,000 companies which have come forward so far, and that number is growing.”

He added: “The regulator seems to believe that they can’t regulate brokers, or they shouldn’t. But it would be the easiest thing in the world to insist that suppliers are open about the commissions they pay. Failing to do so has given rise to an improper industry.”

Ofgem has promised for at least 10 years to take action against brokers who lock companies into poor value deals. After its latest review, in 2020, the regulator said it would force suppliers to disclose how much they were paying brokers in commission – but only for so-called “microbusinesses” of nine or fewer employees.

Business groups are calling for the regulator to extend this protection to larger small and medium businesses.

Ofgem said it had “listened loud and clear to calls to protect businesses of all sizes from sharp practice by energy brokers”.

A spokesperson said Ofgem had completed “the most detailed ever review” of the business energy market and would set out “a comprehensive package” of new proposals to tackle poor behaviour by energy suppliers later this week: “This will include immediate actions we can take within our existing rules and where we might need stronger powers.”

UK
Telegraph publisher hails profit rise amid subscription push as bidders circle

Holly Williams, PA Business Editor
Mon, 24 July 2023 



The publisher of The Daily and Sunday Telegraph has said the majority of its annual sales now come from subscriptions thanks to a digital push as it looks to weather wider pressure on newspaper revenues and cost hikes.

Telegraph Media Group (TMG) – which was put up for sale in June after talks between their billionaire owners, the Barclay family, and lenders collapsed – reported a 2% rise in subscriptions to 734,000 in 2022, thanks to an 8% hike for digital subscriptions.

Chief executive Nick Hugh said the group was “firmly on track” to achieve its target of reaching one million subscriptions in 2023, adding it was likely to hit the milestone ahead of the year-end goal.

In figures published for the first time for 2022, it said digital subscription revenues jumped 31% to £57.9 million, helped by price increases.

Overall, subscriptions accounted for 51% of total wider revenues last year, it said.

This has increased further to 52% so far in 2023 as TMG said the subscriptions growth momentum had continued – reaching over 974,000 as of June.

Last month, it emerged that the Daily and Sunday Telegraph and The Spectator magazine were being put up for sale after the Barclay family lost control of the titles following a bitter row over unpaid debts.

Lloyds Banking Group appointed corporate finance advisory firm AlixPartners as official receivers for B.UK, the overall holding company of the publications.

Potential bidders said to be interested in buying the Telegraph titles include the Daily Mail & General Trust, owner of the Daily Mail, Mail on Sunday, The i and Metro.

Other suitors are thought to include the German publisher of Bild, Axel Springer, while News UK may be another to enter the fray for The Spectator, according to reports.

There was no update on the sale process in the TMG accounts.

Revenues lifted 4% to £254.2 million in 2022, but the group – which bought the Chelsea Magazine Company in March – signalled that sales growth had increased to around 8% in 2023.

TMG said: “TMG remains confident in the strategy and expects that profitability will increase further in 2023, despite continued decline in print advertising revenues and well-documented inflationary pressures.

“Revenue (excluding Chelsea Magazine Company) is increasing at approximately double the rate of last year.”

It said industry challenges remain, but that its focus on growing subscriptions was helping provide “greater revenue visibility into future years”.

“Industry-wide structural decline in print circulation and advertising revenue continues at a consistent rate,” TMG said.

“Considering these trends and market conditions, the significant progress that has been made in growing subscriptions has reaffirmed the company’s commitment to its subscription-first strategy.”

Sir Frederick Barclay and his twin brother, Sir David Barclay, who died in 2021, bought the Telegraph newspapers in 2004 for £665 million.

UK

Sharp slowdown in private sector growth surprises economists

August Graham, PA Business Reporter
Mon, 24 July 2023 

The UK’s private sector appears to have slammed the brakes on growth so far this month, as it fell well short of expectations in a closely followed survey.

According to the purchasing managers index, the economy is still growing, but has fallen behind compared to previous months.

The survey, compiled by S&P Global and CIPS showed that it sank to its weakest point in six months.

It scored 50.7 in July, down sharply from 52.8 last month.

Supply chains improved rapidly this month, the survey indicated (Gareth Fuller/PA)

Although the figures indicate that the economy is still growing, anything over 50 is positive, it is a sharp slowdown and much worse than the 52.3 that experts had forecast.

The lower the figure goes the worse it is for the economy.

The companies who filled out the survey said that they had been hit by rising interest rates, still high levels of inflation and caution among customers.

It dampened the post-pandemic rebound in what households spend on leisure activities, the survey found.

“The UK economy has come close to stalling in July which, combined with gloomy forward-looking indicators, reignites recession worries,” said Chris Williamson, chief business economist at S&P Global Market Intelligence.

“July’s flash PMI survey data revealed a deepening manufacturing downturn accompanied by a further cooling of the recent resurgence of growth in the service sector.”

Dr John Glen, chief economist at the Chartered Institute of Procurement and Supply said: “Higher borrowing costs are here to stay and the private sector knows it.

“Interest rate hikes are not just affecting new orders today but spending plans long into the future.

“The biggest concern is increasingly not if the UK economy will enter recession but for how long.”

But there was some good news among the bad.

Manufacturers reported that the time it took their suppliers to deliver goods dropped at the fastest rate since January 1992 when records began.

It marks a normalisation in supply chains that brought down cost pressures for companies, and allowed them to reduce what they charged customers.

“The jigsaw pieces for a supply-led reduction in inflation are falling into place,” Dr Glen said.

“Global supply chains are returning to normal after years of pandemic shortages and rising costs.

“Stocks of unused goods built up to help manage Brexit, the pandemic and most recently global shipping disruption are finally being run down.

“Manufacturing input costs are falling and supplier performance is improving at the fastest rate we have ever seen.

“This renewed supply chain agility, combined with falling raw material and transportation costs, could not have come at a better time for business.”

UK  

Major banks' privacy policies allow them to monitor customers' social media accounts


Neil Johnston

The Telegraph 
Sun, 23 July 2023 

Social media apps on a phone

The country’s biggest banks have quietly introduced the right to monitor customers’ social media into their privacy policies, The Telegraph can disclose.

Despite public denials that they carry out checks on sites such as Facebook and Twitter, the four biggest high street lenders and several others have buried in the small print of their privacy policies that they may obtain information from social media accounts.

Banks are facing increasing pressure to reveal what checks they carry out on customers after Nigel Farage, the former Ukip leader, discovered the exclusive bank Coutts closed his accounts after it was deemed that his views “do not align with our values”. A dossier compiled on Mr Farage included examples of his posts on Twitter.

The Brexiteer is also demanding an apology from the BBC, after it inaccurately reported that his account was closed for commercial reasons, the day after its business editor sat next to Dame Alison Rose, the chief executive of Natwest, at a dinner.

Mr Farage has now lodged a complaint with the Information Commissioner over the briefing to the corporation about his account.

Banks are facing increasing pressure to reveal the checks they carry out on customers after what happened to Nigel Farage

It comes as the Telegraph can reveal that three more banks are being scrutinised by the Treasury amid claims accounts have closed because of customers’ political views.

The cases relate to Metro Bank, Yorkshire Building Society and American Express.

The specifics of the cases being looked at by officials are not known. However, the political parties Reform UK and the Brexit Party are both understood to have had difficulties with their accounts with Metro Bank. It recently emerged that Yorkshire Building Society closed the account of Reverend Richard Fothergill days after he wrote to the bank complaining about its messaging for Pride month. Richard Tice, the Reform UK leader, has also told The Telegraph that his American Express account was suspended for a number of weeks earlier this year.
Watching social media

Natwest, which is 39 per cent owned by the taxpayer and is the parent company of Coutts, did not answer questions about whether it regularly looks at customers’ social media.

However, in a 13-page privacy notice it said it may gather “information that you make public on social media”, including Facebook and Twitter. Coutts’ policy is identical.

Lloyds Banking Group, which also owns Halifax and Bank of Scotland, ignored questions about the issue, but admits in small print it may collect information from “published media and social networks”.

The banks do not refer to this in the terms and conditions for account closures.

HSBC also refused to deny that it monitored customers’ social media. In its 28-page privacy notice, it admits it could monitor information “that relates to your social interactions, such as your communications via social media, between individuals, organisations, prospects”. The bank said it would not comment on internal processes.

Barclays admits that in some circumstances “we collect information about you, such as from your actions on our social media pages or through the social media”, when explaining what data it holds.
Public information

When asked about the issue, Nationwide said it does “not actively or monitor social media profiles”, but online states that “in certain situations, we may use information that you’ve made public such as tweets or social media content too”.

Santander says it does not monitor customers’ social media accounts, but that it will check publicly available data sources.

Virgin Money said that it does “not ordinarily examine people’s social media accounts to fulfil our regulatory obligations”, unless this is relating to a complaint.

Metro Bank says it will “occasionally obtain [information] from publicly available sources, such as social media sites”.

Refinitv, which owns the World-Check Risk Intelligence database that is used by banks to search for regulatory red flags on potential customers such as terrorism, crime or political exposure, also looks at social media, but said this was for biographical information rather than risk factors.

UK Finance, the banking industry body, has admitted that lenders could run checks on customers using social media.

“Banks [are] allowed to monitor social media of their clients, well to the same degree as other people,” a source said last week. “They’ve also got more obligations to monitor their customer activity than many other businesses as they’re in the regulated sector.”
‘People will be horrified’

Mr Farage likened banks monitoring customers’ social media to Communist China.

“I don’t want to live in communist China, yet increasingly we are. The banks are out of control and need to be brought to heel. People will be horrified by this.”

Gareth Johnson, the MP for Dartford, said it was disturbing that banks had given themselves the green light to monitor social media.

“This smacks of a big brother approach from the banks. I cannot see what anybody’s social media activities have to do with their bank. Too often the banking sector seems to have lost its way recently which should worry us all.”

NatWest said: “It is not our policy to exit a customer on the basis of legally held political and personal views. Decisions to close an account are not taken lightly and involve a number of factors including commercial viability, reputational considerations, and legal and regulatory requirements.”

Barclays said it complies with legal and regulatory obligations and would only withdraw services “in exceptional circumstances”.

A Metro Bank spokesman said: “It is not our policy to close or refuse an account due to the political or personal beliefs of an individual or organisation.”

A request for comment was submitted to spokesmen for Yorkshire Building Society and American Express.

UK MPs challenge VC firms over record on female and minority-led firms

Joanna Partridge
Sun, 23 July 2023 

Photograph: Chon Kit Leong/Alamy

The venture capital industry has come under fire from MPs for its “unacceptable failure” to invest in businesses located outside London or south-east England, or those run by women and ethnic minorities.

Businesses founded exclusively by women were revealed to have received just 2% of all venture capital funding in 2022, while even less investment went to companies led by black or other minority ethnic executives.

Parliament’s Treasury committee is now urging the sector to implement rapid change, and is calling on the government to play its part.

Venture capital is a kind of financing provided by investors to start-ups or emerging companies, which are seen as having potential for high growth. The investment is usually offered in exchange for a share of the business but can be risky for investors.

The venture capital sector receives support from government through tax reliefs, which are aimed at encouraging investment in the UK.

The cross-party Treasury committee of MPs has criticised the unfair allocation of funding revealed by the diversity statistics and is calling on the industry and government to urgently improve the figures as well as transparency.

Data also showed that the overwhelming majority (80%) of venture capital investment flows to the “Golden Triangle” of London, Oxford and Cambridge, a situation the committee called “unacceptably concentrated”.

Nearly half of all venture capital funding goes to small businesses based in the capital, despite it only being home to under a fifth (19%) of such firms.

The committee said it can take companies based elsewhere in the UK longer to become established, and called on the government to extend tax reliefs which are currently limited to companies that are less under seven or 10 years old, saying this holds back economic growth and innovation.

The committee complained that it had still not received information from the Treasury on when venture capital tax reliefs with expiry dates would be extended.

Harriett Baldwin, chair of the committee, said the statistics showing that most venture capital finance failed to reach female and ethnic minority-led businesses demonstrated a “shocking dereliction of duty given the level of government support for the industry through tax reliefs”.

She added: “Firms must be compelled to reveal their diversity data when applying to these tax reliefs in an effort to increase transparency and drive change. Government incentives could also be tweaked to encourage more regional venture capital investment.”

The committee, which in recent days said it would renew an inquiry into sexism and misogyny in the City after a spate of sexual harassment allegations in the world of business, said it would be keeping a close eye on developments.

The MPs also have urged the Treasury to make collecting and publishing the diversity statistics of venture capital firms and their investments a requirement for eligibility.

British Airways owner backs Teesside green fuel maker

Oliver Gill
Mon, 24 July 2023 

british airways

The owner of British Airways has invested in a green aviation fuel producer based in Teesside as the airline industry races to meet net zero targets.

IAG, the FTSE 100 group behind the UK flag carrier, Aer Lingus and Spain’s Iberia, is to invest in Nova Pangaea Technologies, which is building its headquarters within the Teesside Freeport.

Nova Pangaea has developed technology to turn waste products such as wheat straw, sawdust and leftover wood trimmings into feedstock to create so-called sustainable aviation fuel (SAF).


SAF has a far lower carbon footprint than current jet fuel and is seen as the best way to cut the environmental impact of the aviation industry.

However, production is currently small-scale, and industry is pushing to rapidly ramp up supply to meet net zero targets.

IAG’s investment in Nova Pangaea will help the start-up establish its first commercial waste-to-fuel factory, with the airline group set to become a customer.

The size of the investment was not disclosed, though Nova Pangaea’s chief executive Sarah Ellerby called it “transformational”.

IAG’s backing comes as it races to meet a goal of fuelling 10pc of its flights with sustainable aviation fuel by 2030.

The Government has set a goal of decarbonising Britain’s airline industry by 2050 under its “Jet Zero” plan. SAF is seen as the fastest option for transition, with current planes able to run on the fuel.

Luis Gallego, the airline group’s chief executive, said: “Sustainable Aviation Fuel is the only realistic option for long haul airlines to decarbonise, which is why investment in this area is so critical.

“We are not just buying SAF, we are willing to invest in developing the industry, but we need governments in the UK and Europe to act now to encourage further investment.”

Nova Pangaea announced in November last year that it would build its headquarters and first commercial plant at Wilton International, an industrial site within Britain’s largest freeport at Teesside.

Tees Valley mayor Ben Houchen told The Telegraph that IAG’s investment marked a “huge coup for Teesside, bringing more of the cleaner, safer and healthier jobs of the future”.

He added: “Decarbonisation is one of the biggest issues facing the aviation industry today. If we’re truly serious about becoming the UK’s clean energy powerhouse and growing Teesside Airport responsibly, SAF is an opportunity that we need to grab with both hands.”

Ben Houchen (right) with Rishi Sunak at the Teeside Freeport in 2022 - Charlotte Graham

IAG’s investment in the area is a boost for the under-fire mayor who is facing allegations of sweetheart deals with two local businessmen at Teesworks, a 4,500-acre brownfield development that forms part of the freeport zone.

Michael Gove, the Levelling Up Secretary, has ordered an inquiry into the claims. Mr Houchen and others accused have all denied any impropriety and branded it a Labour “smear campaign”

However, the furore has threatened to overshadow plans to revitalise a region and has already prompted companies to rethink plans to build factories at Teesworks.

The claims do not relate to the Wilton International industrial site where Nova Pangaea Technologies will be based.

Ms Ellerby said: “Our facility will be the UK’s first commercial plant of its kind, and it will play a crucial role in decarbonising the aviation sector, as well as providing local employment opportunities.

“We are confident of beginning construction later this year and producing second-generation biofuels by 2025.”

UK
Octopus Energy to invest £15.5bn in offshore wind projects by 2030

Rebecca Speare-Cole, 

PA sustainability reporter
Mon, 24 July 2023 



Octopus Energy has announced plans to invest £15.5 billion in offshore wind projects and farms by 2030.

The British energy group’s renewables generation arm said the money will go towards the generation of 12 gigawatts of renewable electricity per year, which is enough to power 10 million homes.

The investment will be targeted at existing wind farms, or those already under construction, as well as developers of new offshore wind across the world, with a focus on Europe.

The sustainable energy and technology group, which already manages £6 billion of green energy projects globally, revealed that it already has “several deals” in the pipeline.

It said the investment would deliver more clean energy worldwide as well as create “numerous” jobs.

Zoisa North-Bond, CEO of Octopus Energy Generation, said: “Offshore wind has already rapidly transformed the UK’s energy system – and we’re incredibly excited about the potential for this technology globally.

“We’ve got big plans to invest in even more of these big fans to help wean ourselves off polluting gas.

“Offshore wind will undoubtedly continue to play a pivotal role in meeting net zero, boosting energy security and driving down bills.”

The group already has stakes in the Lincolnshire and Hornsea One offshore wind farms off the east coast of England, and acquired the Borssele V wind farm in the Netherlands.

It has also invested in Simply Blue, a developer of innovative floating offshore wind projects, a type of offshore wind technology that taps into strong winds deeper out at sea.

Work stopped on one of the UK’s largest offshore wind farms after its developer, Swedish energy giant Vattenfall, said that the cost of the project had soared by so much it no longer made financial sense to push forward.

Vattenfall said market conditions had deteriorated since it signed a contract that fixes the price of the electricity it sells for 15 years, and it plans to review two other projects in the area, known as Vanguard East and Vanguard West.

UK

Manchester plans world’s largest battery to tackle intermittent wind energy

Howard Mustoe

THE TELEGRAPH
Mon, 24 July 2023 

Scotland's first ever commercial windfarm

Blueprints for the world’s largest battery on the site of an old coal-fired power station in Manchester, storing enough energy for 36,000 homes for a week, have won approval from planning officials.

Carlton Power, an independent energy company, will need to raise £750m for the plant and is “advanced talks” to raise the funds, it said. It will then need to pick a supplier.

Battery plants are seen as a way to smooth out power demand as more electricity comes from intermittent sources like wind and solar.


Batteries can charge on windy or sunny days cheaply, or even for free, and then deploy that power when needed. The plant is expected to offer the equivalent of 2,080 megawatts – a decent sized power station – for an hour.

Planning permission was granted by Trafford Council. Carlton has also won approval for a green hydrogen project in the area.

Councillor Tom Ross, the leader of Trafford Council, said: “The Trafford battery energy storage scheme, alongside the Trafford Green Hydrogen scheme, places Trafford and Greater Manchester at the forefront of the UK’s energy transition. The two schemes will help address our climate crisis – one of Trafford Council’s corporate priorities - and will support our region’s plan to reach a target of net zero carbon emissions by 2038.”

It will be built at the Trafford Low Carbon Energy Park in Greater Manchester, which will also host the world’s first commercial liquid air storage system, being built by Highview Power, another energy storage firm, using its cryobattery technology.

The pioneering technology works by compressing air into a liquid and then cooling it to almost minus 200°C. The liquid air is stored in an insulated tank at low pressure, which functions as the energy store. When power is needed, liquid air is drawn from the tank and pumped to high pressure.

Stored heat from the air liquefier is applied to the liquid air via heat exchangers and an intermediate heat transfer fluid. This produces a high pressure gas, which is then used to drive a turbine and generate electricity.

The technology competes with pumped-storage hydroelectricity, which uses excess power to pump water uphill, releasing it through turbines to generate electricity.

It takes a few minutes for a liquid air station to start generating power, which is where batteries can fill the gap.

Chris McKerro of Carlton Power said: “Our battery energy storage scheme will make a significant contribution to the resilience of the North West’s energy system and, combined with our green hydrogen scheme and the cryobattery project, underlines Trafford Park’s importance to the energy transition in the region and the journey towards Net Zero.”

UK

Ban on new petrol and diesel cars from 2030 will remain in place, says minister

WILL IT OR WON'T IT? ASK THE PM!


Ben Hatton, PA Political Staff
Mon, 24 July 2023

The ban on selling new petrol and diesel cars from 2030 “will remain in place”, a minister has said despite reports it could be scrapped.

Speaking during a round of interviews with broadcasters, Foreign Office minister Andrew Mitchell initially stopped short of committing to maintaining the ban, saying people should “wait for any announcement” and that he could not “prophesise for the future”.

But after a series of questions on the issue, he said the 2030 ban remains in place “and will remain in place”.

Some Tory MPs have called for a “rethink” over the speed at which net-zero goals are pursued, citing tensions with addressing the cost of living.

But Mr Mitchell said “you can do both”, and also described the wildfires on the Greek island of Rhodes as “undoubtedly a wake-up call” on climate change.

Andrew Mitchell said the ban will continue to remain in place (PA)

Rishi Sunak is said to be considering delaying or ditching climate change-tackling measures that could impose costs on consumers.

One of the options on the table is an exemption for smaller car manufacturers — dubbed an “Aston Martin exemption” — on the 2030 ban on new petrol and diesel cars, according to The Times.

Asked on BBC Radio 4’s Today programme if the ban on the sale of new petrol cars from 2030 is still in place, Mr Mitchell said: “It absolutely is.”

Asked if it will remain that way, he said “well, all I can tell you is it is in place”, but when challenged again said: “Well, I’m afraid I can’t prophesise for the future.”

He denied the suggestion that he is unsure whether it will stay for the rest of the term of this Government, saying: “That is not what I am saying. I am saying that it is in place and it remains in place.”

Asked again if it will remain in place, he said: “And will remain in place.”

A campaign against the Ultra Low Emission Zone around London was credited to the Conservatives holding on to Uxbridge and South Ruislip in the recent by-election (PA)

Facing similar questioning around the petrol and diesel ban earlier on Times Radio, Mr Mitchell said: “I think the important thing is to wait for any announcement from the Government.”

He said the Government has taken “affordable” measures on reducing emissions, and that the UK is “leading” in the area internationally, adding: “But equally the Government has made it absolutely clear under this Prime Minister that we will defend people from rising costs whenever we can.

“Certainly we should pursue net zero”, he told GB News, adding “but equally we have to defend households and individuals from rising costs.”

The Times also reported that the Government is considering a ban on new low-traffic neighbourhoods (LTNs), with ministers reportedly weighing up preventing councils from using the national number plate database to stop the zones being enforced.

It comes as concerns around the planned expansion of London’s ultra low emission zone (Ulez) helped the Tories hang on to Boris Johnson’s old Uxbridge and South Ruislip constituency during last week’s by-election.

Former business secretary Sir Jacob Rees-Mogg and Danny Kruger, the co-leader of the New Conservatives, a group of Tory MPs elected since the Brexit referendum, both called for green deadlines to be reconsidered on Sunday.

UK

Why Rishi Sunak is backing away from the 2030 petrol car ban

Matt Oliver

THE TELEGRAO]PH
Mon, 24 July 2023 

Net Zero Electric Car

With Tory backbenchers demanding a rethink on Britain’s net zero policies, Rishi Sunak gave a less than convincing answer when challenged over one of the Government’s signature pledges.

A ban on the sale of new petrol and diesel cars is due to come into effect from 2030, having been announced with much fanfare by the Prime Minister’s predecessor Boris Johnson.

But when asked whether he would stand by the plan on Monday, Mr Sunak equivocated.

“Of course net zero is important to me,” he said. “So yes we’re going to keep making progress towards our net zero ambitions and we’re also going to strengthen our energy security.

“I think the events over the last year or two have demonstrated the importance of investing more in home-grown energy, whether that’s more nuclear or offshore wind. I think that’s what people want to see and that’s what I’m going to deliver.”

The comments have set the set the stage for a major U-turn, although Downing Street has insisted the 2030 ban remains official policy.

It is the latest twist in a saga going back to Mr Johnson’s premiership.

With a year to go before Britain hosted the Cop26 climate conference, Boris Johnson was preparing to make an eye-catching announcement.

The then-prime minister was poised to set out his 10-point plan to spark a green industrial revolution – and the centrepiece was a vow to ban the sale of new petrol and diesel cars by 2030.

A highly ambitious target, this was five years sooner than the deadline he had set just nine months earlier, which car industry bosses dismissed as “a date without a plan”.

It was also a decade before the target outlined by his predecessor, Theresa May, only two years beforehand.

“Our green industrial revolution will be powered by the wind turbines of Scotland and the northeast, propelled by the electric vehicles made in the Midlands and advanced by the latest technologies developed in Wales, so we can look ahead to a more prosperous, greener future,” Mr Johnson said in November 2020.

Boris Johnson and other ministers hoped his 10-point green plan would cement demand for electric vehicles - Freddie Mitchell/No10 Downing Street

His speech, the Government said, would put the UK on course to be the fastest G7 nation to decarbonise road transport.

Yet the new sales ban – described by the Society for Motor Manufacturers and Traders as “immensely challenging” – represented a huge gamble, with the potential to either turbocharge or tank Britain’s domestic car industry.

And astonishingly, for such a consequential policy, no detailed proposals to achieve it had actually been drawn up.

Instead, Johnson and other ministers hoped the stretching target would cement demand for electric vehicles, galvanising businesses to manufacture supplies and build the legions of chargers that would be required.

“It’s like the classic example of putting a man on the moon,” one former minister involved in the policy says.

“When Kennedy said ‘We’re going to put a man on the moon’, he did not know how they were going to get there. He just said this is the target – and they got there.”

Fast forward to today, however, and the scale of the undertaking has become clear.

Electric cars still remain unaffordable for most households, while a huge upgrade of the power grid will be needed in order to boost the number of vehicle chargers in Britain from 42,000 at present to the more than 300,000 being sought by ministers.

Meanwhile, to serve demand for vehicles domestically, around five battery “gigafactories” are needed in the UK – with hundreds of thousands of industry jobs at risk if they are not secured.

Experts say we are now at a crossroads. A report published this week by the Climate Change Committee, the statutory net zero watchdog, said that rising electric car sales were promising but work to build chargers “now needs to scale up more quickly”.

Separately, industry leaders say time is running out for Britain to secure the gigafactories that will be the bedrock of its future car manufacturing base. A failure to do so, while sticking with the 2030 ban on new petrol car sales, threatens a jobs bloodbath.

As the clock ticks down, alarm is growing that Britain will simply not be ready for 2030 – and a delay is increasingly likely.

Carbon cost

The UK’s commitment to reach “net zero” carbon emissions by 2050 will require emissions from vehicles to be almost eradicated.

Surface transport, including cars, accounts for the biggest chunk of Britain’s annual carbon emissions, representing 23pc last year.

This was about 105 million tonnes of carbon dioxide equivalent, the Climate Change Committee’s latest report says, which was 3pc up from 2021 but 8pc below pre-pandemic levels.

The reduction was mostly down to increased working from home, rising fuel prices and so-called low-traffic neighbourhoods, with a small contribution from rising electric vehicle sales.

But a crunch point is fast approaching at which sales of electric cars – which have much lower lifetime emissions than petrol ones – will need to do more of the heavy lifting.

Petrol cars tend to have lifespans of around 14 years, says Mike Hawes, chief executive of the Society of Motor Manufacturers and Traders (SMMT).

“So immediately that says, well, you’ve got to stop selling internal combustion engine (ICE) cars by 2035, to be able to have most off the road by 2050 and deliver net zero,” he adds.

This 2035 target was effectively adopted earlier this year by the European Union, while Denmark has joined the UK in proposing a more ambitious target of 2030. Norway, where eight in 10 cars bought are already electric, is aiming for a 2025 phaseout.

The UK’s own target had initially been 2040 but this was then changed twice by Boris Johnson, who had a longstanding passion for green issues and was encouraged by his now-wife Carrie Symonds.

Johnson thought Britain could steal a march on the rest of the world by pushing car companies to go electric sooner, by 2030, according to his former allies in government.

“Boris was a great directional leader. He was really good at painting a vision and saying ‘Let’s get there, I don’t care how we get there but let’s get there,’” says one minister who was involved in discussions.

“It would force you to think of how to do it.”

In at least that respect, the policy had immediate effects. Industry groups quickly warned a “Herculean effort” would be required, with the SMMT claiming success would “depend on reassuring consumers that they can afford these new technologies, that they will deliver their mobility needs and, critically, that they can recharge as easily as they refuel”.

Crucially, however, car companies secured an important concession. The sale of hybrid cars – which are part petrol, part battery-powered – would still be allowed until 2035.

This went against the Climate Change Committee’s recommendation that all carbon-emitting cars be phased out by 2032 at the latest. But it gave a stay of execution to several car plants, most of which were soon to produce only hybrids anyway.

Honda and Ford had both warned that job losses could result from an earlier hybrid ban, the Guardian reported. Honda closed its Swindon plant in 2021.

Since then, the Department for Transport has set out proposals for the so-called zero-emission vehicle (ZEV) mandate, which sets quotas for how many electric cars manufacturers must sell.

This would start at 22pc next year and gradually rise annually to reach 52pc by 2028 and 80pc by 2030.

“We’re up for the challenge, but we need to ensure we’re using every lever to move that market and encourage people to make the shift,” says Hawes.
Prohibitive pricing

By far the biggest thing that puts many drivers off buying an electric car is cost.

The top-selling EVs in Britain last year were Tesla’s Model Y and Model 3, which cost about £45,000 and £43,000 respectively, registration statistics show.

Next was Kia’s Niro and Volkswagen’s ID.3, both starting at about £37,000, and market stalwart the Nissan Leaf, which starts at £29,000.

The cheapest four-seater available is the MG4 EV, a Chinese model, at £27,000.

Yet all these remain far more expensive than the lowest-priced petrol cars, with the Dacia Sandero costing about £12,600, the MG3 £13,300 and Kia Picanto £13,400.

“We badly need the cost of electric cars to come down,” says Simon Williams of the RAC.

Like heat pumps, an electrically powered heating solution that the Government has backed to replace gas-fired boilers, proponents often argue that the running costs of EVs are actually cheaper than petrol cars.

Yet the upfront costs remain prohibitive for most families, similarly because the technology is not as mature as the fossil fuel-powered alternatives.

In the case of EVs, the biggest reason for this is the cost of batteries – the most expensive components that go into them.

The Climate Change Committee has said lower battery prices are essential to wider EV uptake, but has flagged this as an issue that is now “slightly off track”.

After a steady decline previously, prices increased in 2022 as global markets were convulsed by supply chain disruptions caused by the aftermath of the pandemic and the war in Ukraine, pushing up the costs of essential metals and other materials.

Meanwhile, although it remains cheaper to run an electric car than a petrol one if you charge it at home, rising electricity prices have made battery power less competitive for those who rely on public chargers.

This disparity is worsened by unequal rates of VAT, as well. Those who charge at home pay a rate of just 5pc, while those who charge using public infrastructure pay 20pc.

Another cost will come in 2025, when electric vehicles lose their exemption from vehicle excise duty under changes announced by the Chancellor Jeremy Hunt in his Autumn Statement last November.

One way of making electric cars more affordable is a salary sacrifice scheme, which allows workers at some companies to lease vehicles and pay out of their gross salary – ensuring it is tax-efficient.

Fiona Howarth, chief executive of Octopus Energy’s electric vehicles business, which leases company cars, says her company works with more than 3,000 businesses and has already leased 10,000 cars since setting up two years ago.

It has secured £650m in funding from investors, with around £400m committed so far.

“Salary sacrifice and other company car schemes are a very popular route for EVs,” she says, “because salary sacrifice actually makes it cheaper on a monthly basis to go for an electric car, versus the petrol or diesel equivalent – and that’s before any fuel saving.”

Those who charge at home can save another £1,000 a year in fuel, Howarth adds. “So that makes it very attractive to make the switch.”

One of the problems for buyers in recent years has been availability, as demand outpaced supplies. Some market players have successfully scaled up output, such as Tesla, which went from producing 100,000 cars in 2017 to 1.4m in 2022.

By comparison, German behemoth Volkswagen said it delivered 572,000 EVs that year but was nursing another 310,000 backorders in western Europe alone as supply chain problems crimped output.

“There is just soaring demand for EVs, and the manufacturers are now kind of scrambling to catch up,” Howarth adds.

Customers who order some upmarket brands can expect to wait as long as two and a half years, while last year it was common to wait nine to 12 months for other models.

This is one drawback of the more affordable Chinese makes, which must be shipped to Europe and are generally being directed first towards bigger, left-hand drive markets rather than right-hand ones such as Britain.

“The Chinese brands are the most affordable EVs on the market at the moment with very good range, and they’re very popular cars,” Howarth says.

“And they have had challenges keeping up with some of that demand.”

Overall, EVs represented 17pc of new car sales in 2022, ahead of what the Climate Change Committee says is necessary at this stage to hit net zero.

One catch, however, is that the new car market remains 30pc smaller than in 2019.

Most experts agree that almost equally as important to the wider rollout of EVs is the more affordable second hand market, which remains tiny. Only 1pc of these sales were EVs in 2022, with Autotrader listing only 20,000 electric cars on Friday compared to more than 425,000 petrol, diesel and hybrid cars.

Meanwhile, amid rising cost of living pressures, there are fears that customer appetite is suffering.

VW this week scaled back EV production at one of its German plants, with the car maker’s works council blaming “strong customer reluctance”. Contributing factors included falling subsidies, surging inflation and long delivery times.

Volkswagen is cutting electric car production at one of its biggest factories after ‘strong customer reluctance’ led to lower sales than expected - David Hecker/AFP

Olaf Lies, a politician who sits on the council, said the decision represented a “warning signal for the industry”.

“The registration figures for electric cars remain high, but what we are concerned about is the current dip in demand – and not just at Volkswagen, but at all manufacturers,” he said.

Patchy progress

Another major concern many drivers have about electric cars is “range anxiety” – the fear their vehicle could run out of battery with no chargers nearby.

Grant Shapps, who was transport secretary when the 2030 policy was announced and is now Energy Secretary, is an electric car driver himself and recognised the need to tackle range anxiety straight away, a colleague says.

In response, the Government has pledged £1.6bn towards expanding the UK’s charge point network as part of plans to reach at least 300,000 chargers by 2030, or roughly 430 chargers per 100,000 people. By that point, it is expected there will be as many as 10 million EVs on the road.

“No matter where you live, we’re powering up the switch to electric and ensuring no one gets left behind in the process,” Shapps said in March 2022.

However, progress so far has been patchy. There are currently about 40,000 chargers in the UK, including almost 8,000 “rapid” ones capable of charging a car from 20pc to 80pc battery in about half an hour, according to official data.

These are unevenly distributed, however, with the bottom fifth of local authorities providing just 20 chargers per 100,000 people compared to 55 across England and 134 in the top fifth of authorities.

Roughly one in 20 chargers was also out of service last year and consumers must navigate as many as 20 different providers. The Government is also behind on its target to have six rapid chargers at every motorway service area in England by the end of this year, with less than a quarter of 119 sites reviewed by the RAC meeting this requirement.

This is vitally important, argues the RAC’s Williams. “Day to day driving in an electric vehicle is actually easy, because most people don’t drive that many miles every day,” he says.

“It’s only really when you start to make journeys beyond the range of your vehicle that you’re going to need to recharge on a journey. And you’ll want to do that as quickly as possible.

“While early adopters have been willing to plan their journeys to take a little bit longer, everyday drivers won’t want to do that.”

A large number of new chargers are in the pipeline, with charging companies having committed £6bn towards building them by 2030. But the Climate Change Committee has still raised questions over whether the pace of change is fast enough.

Ian Johnston, the chief executive of charge point company Osprey and chairman of industry body ChargeUK, claims provision is generally good and that bad patches these days are the exception rather than the rule.

“If you look at what the private sector is doing and what private landlords are doing, we’re seeing a phenomenal deployment of charging,” he says, pointing to a growing number of supermarkets, workplaces and residential streets where they can now be found.

According to ChargeUK, March and April were the best ever months for installations, with more than 2,000 chargers installed in both, a 75pc increase on a year ago.

However, the industry needs to build about double that amount every month on average to hit the Government’s target.

And this growth is chafing against physical constraints, says Johnston. For example, getting one of the regional power grid operators to connect charge points to the electricity grid is often delayed due to a lack of engineers, while the process of obtaining planning consent in many areas often drags on.

The Government has pledged ambitious plans to reach at least 300,000 chargers by 2030 - Chris Ratcliffe/Bloomberg

Charging prices are also still on the rise. Since September 2021, the cost of using an “ultra rapid” public charger has more than doubled from 34.2 pence per kilowatt hour to 74.2 pence, according to the RAC.

The average cost per mile currently is 10 pence if using a home charger and about 20 pence if using public chargers, compared to about 16 pence per mile for a petrol car that does 40 miles to the gallon, the RAC’s Williams says.

The RAC, the SMMT and electric car advocates want Jeremy Hunt to lower the rate of VAT on public charging to 5pc, so that drivers who do not have off-street parking at home are not unfairly penalised.

“That way, you have a level playing field for all EV drivers,” adds Williams.

In future, with experts predicting that a proliferation of wind and solar power will cause electricity prices to tumble, the environment may also become far more competitive – and tougher – for the many charging providers as the amount they can charge plunges.

“There’s absolutely going to be consolidation,” says Osprey’s Johnston. “Every month you’ve got hundreds of millions going into new charging providers, so there are going to be winners and losers.”

Looming behind all of this is also the question of whether the National Grid can upgrade the country’s electricity system, to make it ready for millions of EVs all charging overnight.

The Grid estimates that by 2030, peak demand for electricity – including EVs – will reach up to 68.5 gigawatts, up from 58.8 gigawatts in 2021.

In terms of throughput, the network will need to carry 38.3 terawatt hours of electricity related to electric cars per year by then, compared to just 2 terawatt hours last year.

Lawrence Slade, chief executive of Energy Networks Association, which represents the UK’s energy network operators, says this will be a “huge undertaking”.

“We’re helping to connect hundreds of thousands of electric vehicle charging points to the networks,” he says, “but there is a significant challenge.”

About 164 gigawatts of connection requests were received in the year to October 2022 – more than twice the entire grid’s worth of capacity.
Factories of the future

With more than 40m vehicles registered to UK owners today, a figure that includes about 35m cars and five million vans and trucks, perhaps the biggest challenge still facing Britain is a manufacturing one.

Only about one million EVs are registered.

At the moment, the car industry employs around 814,000 people, including 169,000 who work in manufacturing according to the SMMT.

Tesla's gigafactory in Berlin opened in 2022 and can deliver 4,000 Model Y cars in a week - REUTERS/Hannibal Hanschke/File Photo

Since the 2030 target was announced, one of the biggest worries has been whether this totemic industry can survive in an electrified world.

According to the Faraday Institution, Britain needs roughly five battery gigafactories to meet domestic demand for electric cars. These factories are seen as crucial, because all other parts of the EV supply chain will orbit them.

So far, the UK has only secured one for certain, at the Nissan factory in Sunderland. Another was due to be built at Blythe, by Britishvolt, but is now in doubt after the company’s collapse and subsequent rescue.

Jaguar Land Rover owner Tata Motors is said to be poised to announce a gigafactory in Somerset following promises of support from the Government, but that has yet to be officially confirmed and Spain has made a counterbid.

Car industry leaders have repeatedly warned that time is running out to secure these factories. Without them, the Faraday Institution has said that the domestic car industry will slowly wither away, as hybrid plants close.

Meanwhile, the 2030 ban has turned up the heat further on UK car makers who are already struggling with “rules of origin” rules – agreed with the EU as part of the Brexit deal – which mean they must also ensure most of their battery components are sourced here or on the Continent.

With Joe Biden’s Inflation Reduction Act luring many firms to the US and President Macron and Germany’s Olaf Scholz offering companies attractive subsidies, is Britain running out of time to sort this issue?

“It’s not too late yet,” says Hawes, of the SMMT. “But as I’ve said before, the window is closing.”

So how likely is success?

“I wouldn’t put a percentage on it, but I’m optimistic,” Hawes insists.
Deadline looms into view

With six and half years still to go, the ban on selling new petrol and diesel cars might still seem a world away.

But in reality, many decisions that could tilt the balance in or out of Britain’s favour need to be made today.

So far the system is keeping up, but a question remains over whether EV manufacturers and charging providers can navigate rising prices and supply chain delays while keeping momentum behind the transition.

Some MPs, including the former business secretary Sir Jacob Rees-Mogg, fear that the 2030 ban on new petrol cars will see Britain lose manufacturing to foreign countries, and have called on Rishi Sunak to push back the target.

One former minister says: “A lot of these targets are aspirational… There’s an element of just trying to get the thing going, and then working out the problems afterwards.

“I do think 2030 is ambitious, but it is not impossible.”

Boris Johnson’s desire for Britain’s EV revolution to be world-beating was always ambitious.

Now, as efforts to expand the charging network flounder, prices stay high and manufacturers struggle to develop a supply chain, it is looking ever harder to pull off.

SEE 

https://plawiuk.blogspot.com/2023/07/uk-rishi-sunak-casts-doubt-on-2030.html

https://plawiuk.blogspot.com/2023/07/rishi-sunaks-net-zero-plans-in-doubt-as.html

https://plawiuk.blogspot.com/2023/07/uk-green-pledges-become-election.html