‘Too many regulators’: North West projects seek government reform

Discussion at E-FWD’s Momentum Morning on 26 June focused on North West carbon capture regulatory challenges, with hopes set on a new industrial revolution. But there are constraints on delivering, with a number of concerns raised around the regulatory burden of the new industries of CO2 disposal and low-carbon hydrogen.

The government has backed carbon capture and storage (CCS) plans in the North East and North West.

Progress is picking up around Liverpool, following Eni’s agreement with the government. Construction on the CO2 gathering pipeline system is expected to begin in August.

Consistent yet slow

Westminster is setting the pace by picking winners. But it could do more to accelerate broader regional industrialisation.

There has been political consensus to support decarbonisation industries for net zero, although this may be changing amid doubts from Conservative leader Kemi Badenoch. But “the policy’s been consistent. For us, it’s about making sure we’re being bold enough with action”, one speaker on the E-FWD panel said.

Other speakers said there was a gap between government ambition and action. The panel took place under the Chatham House Rule.

One example raised was the sheer number of regulators involved in a single project. The government has talked of a clean energy mission board to cut across departments and agencies – but it is not yet able to achieve this.

“The bit that I’m frustrated with is competition for its own sake. We all know that government likes competition [and] we all know that it helps drive down costs,” a speaker said.

“But if you’re building the Channel Tunnel, you didn’t say give me 20 opportunities to build a tunnel to Europe. It’s pretty obvious when you look at a map where you want to build it. So unless someone tells you otherwise, get on and do it.

“Frankly, the North West was a bloody obvious place to do this. There’s an offshore end-of-life gas field, there’s natural hydrogen storage in salt caverns and there’s loads of industry and loads of expertise. And Teesside’s similar.”

© Eve Conroy/DC Thomson

Funding plans

The funding argument rests on the government’s need to deliver value for money. The challenge lies in creating value for money while delivering world-leading projects. By their nature, these projects will be more expensive, more complicated and encounter unexpected challenges.

International financiers have responded positively to the Track 1 CCS plans. But there is not yet a repeatable business model.

At some point, the UK will need to deliver a commercial model to attract finance not supported as a regulated utility.

“The government, in their infinite wisdom, say there’s a different business model for every type of carbon capture,” said another speaker. “They’re all slightly different, they’re all differently structured, they all come with different challenges when you’re looking at it from a fundability perspective.”

This combination of complex funding models with regulatory delays risks driving funders away.

“Financiers don’t like spending five years waiting for a project that might happen. Banks have said: ‘We like a project, are you ready?’ And we have to say: ‘We’re nearly there’,” said a developer. “But those banks have a hundred other projects to do. The sector needs momentum to secure financing.”

Another speaker agreed. Oil and gas production is a “safe industry and we can transfer those skills. We just need to allow the private sector to be more private sector and attract patient capital, to get on with the job. That’s happening, but it’s slow.”

From planning to action

If the North West’s challenge is government pacing, the solution will require different approaches.

The Industrial Strategy acknowledges the disconnects in the UK’s economy. It noted that city regions “are falling short of their economic potential… fixing it requires creating the market conditions for new entrants to emerge and investors to take risks”.

The intersection of clean energy and regional growth suggests the North West is well positioned – and HyNet’s progress demonstrates this.

Another speaker said there were three pillars to the project’s movement. “Industry has spoken with one voice, collaboratively and collectively. We’ve worked incredibly closely with central government… and we work really closely with every local authority.”

The importance for local authorities is “as much about jobs and skills, as it is about the actual capital investment. Because local industry is hurting. Energy prices are high, people have under-invested, labour costs are high.”

© Eve Conroy/DC Thomson

Next steps

Several key actions are required for the North West to realise its ambitions.

First, government must streamline regulatory processes to match industry and global competition.

Second, the financing models need standardisation. Projects must establish commercial funding models that bankers can support.

A higher carbon price, which is likely due to the UK’s decision to link with the European Union Emissions Trading Scheme (EU ETS), will help. However, other elements like the Carbon Border Adjustment Mechanism (CBAM) will also play a role.

Third, HyNet has demonstrated a collaborative model. This should be reinforced and expanded. Industries in the North West should build on the “one voice” approach to secure regional benefits.

Finally, there needs to be more recognition that the energy transition is not just about environmental goals. It is also about preserving and transforming the industrial base of regions like the North West.

One speaker said: “This new industrial revolution will be all about growth. It will provide real economic benefit and produce decarbonisation on a scale that the world will envy.”

With the right support and pace, the North West could become a global exemplar of how traditional industrial regions can navigate the energy transition. It must do this while also creating sustainable economic growth.

The foundations are in place. Now it’s all about execution.