US and EU ‘looking to leapfrog’ UK green investment, MPs are told

Laws such as the Inflation Reduction Act (IRA) in the US and the Green Deal Industrial Plan in the EU risk the UK being left behind in the race for green investment, an energy heavyweight said today.

Laura Sandys, chair of the Energy Digitalisation Taskforce, warned MPs that “we've got to be very careful in the UK not to be complacent about the progress we have made." 

She stressed that "both the US and EU are now looking to leapfrog and to really turbocharge investment. Investors are saying to me, our committees are putting number one for [green] investment right now the US, number two EU, number three Asia, and if there’s some extra money, maybe the UK is a useful market."

“One of the smart things about the IRA in particular is that they have been very focused on the manufacturing, not just the outcomes”, said Sandys.

Evidence session

The comments were made at a UK parliamentary evidence session focused on decarbonisation of the power sector, held by the Department for Business Energy and Industrial Strategy. 

As well as Sandys, also giving evidence to MPs at the session was Adam Bell, head of policy at Stonehaven, Adam Berman, deputy director of Policy, Energy UK, and Rachel Fletcher, director of regulation and economics at Octopus Energy.

Fletcher also identified a gap in the UK energy grid, and urged for the market to capitalise on the energy storage capabilities of EV batteries: “[The UK] has got a wholesale market that works brilliantly to encourage investment in renewable generation. We should be proud of that, and we certainly shouldn't look to rock the boat.

“However, we've got a glaring hole in our arrangements, which is that we do not have markets and the price signals that allow us to optimize the thousands and what will quickly become millions of assets that can be making a massive contribution to balancing supply and demand, batteries on wheels. It would be absolutely unforgivable for us to allow that to that investment to happen, and then pay twice if you like, because we haven't found a way of optimising and using those assets.”

In 2022, the UK government initiated a Review of Electricity Market Arrangements (REMA) to identify the reforms necessary to move the UK towards a decarbonised electricity system by 2035.

In the UK’s annual budget, published this month, Chancellor of the Exchequer Jeremy Hunt classified nuclear energy as sustainable in a bid to lure investors.