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Hydrogen specialists surge on Boris Johnson's 10-point green recovery plans

Other ideas include investing more than £2.8bn in electric vehicles charging points as the sale of new petrol and diesel cars and vans will be banned from 2030 and hybrid vehicles by 2035

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Shares in a number of renewable energy and cleantech companies were given a boost on Wednesday after the Prime Minister laid out a 10-point plan for Britain’s “green recovery”.

With one of the points being to “turn water into energy with up to £500m of investment in hydrogen”, the most notable reaction on the stock market was AIM-listed Powerhouse Energy Group PLC (LON:PHE) surged 13%, AFC Energy PLC (LON:AFC) and ITM Power PLC (LON:ITM) were up 8%, while fellow hydrogen specialist Ceres Power PLC (LON:CWR) up 3%. Self-professed "leader in hydrogen" Johnson Matthey PLC (LON:JMAT) was little moved. 

The government will work with industry toward the aim of generating 5GW (gigawatts) of low-carbon hydrogen production capacity by 2030 for industry, transport, power and homes, while aiming, by the end of the decade, to develop the first town entirely heated entirely by hydrogen, which might seem to involve the gas network of National Grid PLC (LON:NG.).

Out of the state funding of up to £500mln in hydrogen, £240mln is promised to go into new hydrogen production facilities, while other funds will be spent on trialling homes using hydrogen for heating and cooking, “starting with a Hydrogen Neighbourhood in 2023, moving to a Hydrogen Village by 2025, with an aim for a Hydrogen Town – equivalent to tens of thousands of homes – before the end of the decade”.

The long-awaited 'blueprint' set out by PM Boris Johnson today, where out of a £12bn headline number only £4bn is new investment, is a broad outline ahead of an expected detailed policy announcement 'white paper', which has been pushed back to December or perhaps early in 2021.

One of the tenets had already been trumpeted by the PM last month, when he pledged to make the UK “the Saudi Arabia of wind”, by helping fuel investment in offshore wind capacity to power every home in the country by 2030 – though this has been dismissed as unambitious.

Road, air and sea

Other ideas from Downing Street announced today include investing more than £2.8bn in electric vehicles charging points and developing long-lasting batteries in UK gigafactories in order to end the sale of new petrol and diesel cars and vans in 2030.

Of this, £1.3bn is pledged to accelerate the rollout of charging points for electric vehicles in homes, streets and on motorways in England, £582mln in grants for ultra-low emission vehicles, and less than £500mln over the next four years in developing mass-scale production of electric vehicle batteries.

There was an ambitious but vague plan to “strive to repeat the feat of Jack Alcock and Teddie Brown, who achieved the first nonstop transatlantic flight a century ago,” with research into zero-emission planes and ships.

There was not much detail yet apart from to say that Westminster will “support difficult-to-decarbonise industries to become greener through research projects for zero-emission planes and ships”.

Carbon capture and green finance

Number 10 also said Britain aimed to “establish a new world-leading industry in carbon capture and storage”, backed by £1bn of state investment.

This is said to include £200mln of new funding to create two carbon capture clusters by the mid-2020s, with two more by the end of the decade, on top of previous promises to invest £800mln, 'potentially' in northern coastal areas.

A previously announced £1bn energy innovation fund “will help commercialise new low-carbon technologies” and the City of London will be transformed into “the global centre for green finance” through a sovereign bond, carbon offset markets and disclosure requirements. 

There is also a vow to allocate £525mln to help develop at least one large nuclear plant, expected to be at Sizewell in Suffolk, (even though this would rather blot the government's green copybook as the area is part of an official Area of Outstanding Natural Beauty and Site of Special Scietiifc Interest), as well as smaller-scale power stations.

Hoping to win a large chunk of this, Rolls-Royce Holding PLC (LON:RR.) was reported last week to be leading a consortium hoping for £217mln of government funding to build 16 mini nuclear power stations.

With £1bn invested in the next year to make homes, schools and hospitals greener with lower energy bills, along with a one-year extension to the Green Homes Grant voucher scheme by a year, this could provide a boost to the likes of Inspired Energy PLC (LON:INSE), an energy consultancy that helps companies with energy procurement. Another with a potential interest is SDCL Energy Efficiency Income Trust plc (LON:SEIT)

As part of this, by 2023 new homes will need to be warmed without using gas heating.

The final couple of points from Johnson focus on developing cleaner public transport and tree-planting, along with a proposal about “rewilding 30,000 football pitches’ worth of countryside”.

Reaction

The Solar Trade Association was not impressed that solar energy was absent from the plans, noting that this was despite being the most cost-effective electricity generating technology for the foreseeable future, according to the Department of Business, Energy and Industrial Strategy’s own forecasts.

Chris Hewett, chief executive of the body, said: “It is disappointing that Number 10 has yet to grasp the opportunity presented by solar in the UK. Not only is it set to be the cheapest power source for years to come, it also provides good jobs and business opportunities up and down the country.

“Whilst the Prime Minister might have a blind spot for solar, decisions in the market are likely to outpace his thinking. Today the City of London signed a 15-year deal to fund a new solar park, residential solar installations have already bounced back to pre-pandemic levels, all major utilities are expanding their solar ambitions and costs continue to fall. Delivering net-zero is now as much about economics as it is policy.”

Green Party MP Caroline Lucas told BBC radio the plan was “nowhere near ambitious enough, it's not urgent enough, it's not bold enough," and said the £4bn of funds was not enough “to make this a really strategic package".

Ed Miliband, the shadow business and energy secretary, said the plans were “a disappointment”, paling in comparison with the UK's continental cousins.

Indeed, the £4bn of new investment badly pales in comparison with German's plan to invest €40bn in green projects, including €9bn in green hydrogen alone, and France's intention to inest €7bn in ‘green’ hydrogen among its fiscal intentions set out this year, while the UK's £500mln for mass scale production of batteries does not compare to investment many billion in countries such as Germany for new battery manufacturing plants.

Atelium, a provider of information for the electric vehicle and stationary battery storage market, said technology existed to bring power generation nearer to households, with local generation and storage of power, but “with its focus on nuclear energy and offshore wind, the green plan announced this week moves in the opposite direction away from local energy creation and storage, and brings with it much less independence and security for the UK”.

Investment analyst Rob Morgan at Charles Stanley Direct, comments: “Building back better and greener is front and centre of most governments’ minds right now and Boris Johnson’s recent announcements reaffirm that it is no different for the UK.

“However, the burden of instigating meaningful change rests not only on government to set policy, but on business to implement it and financial markets to provide the required funding. We are often seeing a lot of change at a company level that is ahead of government policy rather than in reaction to it which is a positive step.

“All investors can help by making conscious decisions with their own investments, prioritising sustainability and supporting industries to evolve. They are a vital cog in the machine of change.”

Luke Davis, boss of SME investment house IW Capital, said: “This plan has been criticised by some for not going far enough but ultimately, as with anything else, it will be the private sector that makes a difference in innovation and investment. We've seen this already with the Covid vaccines coming through with private companies supporting university or public research programmes. When the private sector sees a challenge it can fix it can be incredibly powerful. 

“The announcement actually comes at a time when investors have never been more willing to do good with their capital. Investors are increasingly altruistic and funds and firms alike are starting to recognise this by making it easier to back green tech or low carbon solutions. 

“This is happening at every level of investment. Not only are retail investors backing ESG funds but sophisticated investors are backing small businesses tackling issues within the sector. IW Capital recently invested into a paper packaging company that replaces traditional plastic alternatives and we saw tremendous demand from investors to back it as part of a sustainable portfolio."

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