Destination Net Zero: Why de-risking the energy transition is good for everyone

Unveiled in February 2022, the Levelling Up white paper aims to address decades-long regional inequalities in income, productivity, education and standards of living. It commits to goals that include a £3.8bn investment in skills by 2024/25, and £4.8bn in infrastructure investments in towns around the UK through the Levelling Up Fund. 

Four months earlier, the government published its Net Zero Strategy. Subtitled “Build back greener”, the strategy sets out the actions necessary to reach net zero carbon emissions by 2050. It earmarks £26bn of government capital investment for net zero, and commits to the UK being powered entirely by clean electricity by 2035 – with the caveat of having security of supply. 

The Net Zero Strategy also promises to support workers in the oil and gas industry to transition to green jobs, which dovetails neatly with the Levelling Up agenda. This commitment should be reinforced by the British Energy Security Strategy and the Ten Point Plan for a Green Industrial Revolution. Together, these are driving £100bn of private sector investment into new British industries – including offshore wind – which is expected to support about 480,000 clean jobs by 2030. Research by the University of Leeds and the London School of Economics finds that one in five UK workers – about 6.3 million – is likely to be affected by the energy transition, so it is crucial to address skills gaps. 

The UK is making headway with the energy transition. There are already more than 410,000 jobs in low-carbon and renewable energy businesses and their supply chains, and companies in the sector are estimated to have had turnover of £41.2bn in 2020. And the UK already exports more than £7bn-worth of goods and services from low-carbon businesses.  

So the benefits of net zero are already being felt across the national economy and in job creation. They are also creating benefits across the UK’s regions.

In Scotland

According to the trade body Scottish Renewables, every gigawatt of renewable electricity installed in Scotland creates about 1,500 jobs and £133m of gross value added (GVA), and the renewables industry’s GVA per employee is £89,000.  

These are secure, long-term jobs that offer skills development for the next generation, according to Scottish Renewables Chief Executive Claire Mack. “I could show you a 25-year energy sector career pathway for people leaving school now,” says Mack. “It’s hard to find other sectors that offer that sense of security.” 

But matching up the energy transition with skills development still requires a lot of planning. Glasgow City Council has been working on a regional ‘just transition skills’ action plan with Skills Development Scotland to think through what changes will need to be made to higher education systems. 

Kit England, Green Economy Manager at Glasgow City Council, points out that these conversations about education hadn’t really been joined up with climate change planning before. “There are a lot of assumptions that we will be delivering large scale infrastructure investment, but we haven’t actually started to have those conversations about making sure we have the right supply of labour – people with the right skills and knowledge and experience to make it happen as well.” 
“There are some significant opportunities, but they need the appropriate support to make sure they're realised,” he says. 

In the North West and Wales 

In North West England and North Wales, meanwhile, the HyNet project aims to create 75,000 jobs by 2035 and generate more than £18bn in GVA through the development of a hydrogen economy and carbon capture. About 350,000 people in the region are currently employed in manufacturing. These jobs will need to be decarbonised, but they provide a skills base for high-value industries, while industrial enterprises looking to decarbonise provide a market for HyNet’s hydrogen and carbon capture businesses.  

“We are putting infrastructure on the ground, and that creates capital investment, new jobs and then operating jobs for that infrastructure in the future,” says David Parkin, Director of Progressive Energy, which is part of the HyNet North West consortium. “HyNet allows companies to retain those high-value manufacturing jobs through the energy transition. Otherwise, if they continue to emit carbon net zero targets will legislate against their existence.” 

On the East coast 

On the other side of the Pennines, a range of projects are taking shape that will both support decarbonisation in the UK and beyond, and generate new high-skill jobs in a region that has been particularly hard-hit by the decline of coal mining and traditional heavy industry.  

The East Coast Cluster is a grouping of businesses and organisations from the Teesside and Humber regions that aim to remove almost 50% of the UK’s industrial cluster CO2 emissions and generate an average of 25,000 jobs annually between 2023 and 2050. Its projects include carbon capture and storage, hydrogen generation and negative-emission power. The region is already home to substantial offshore wind capacity: the UK’s first offshore wind farm opened near Blyth in 2000, with the largest offshore turbines erected in the world at the time. These have created onshore jobs that fit with the region’s existing skills base. 

Robert Hamilton, Head of Investment and Economic Growth at the North of Tyne Combined Authority, explains that it is crucial to connect people to new energy transition opportunities.  

“In the North East, we are – unfortunately – more used to having high unemployment than skills deficits, so that’s a new issue and challenge for us,” he says.  

“Manufacturing wind-turbine foundations requires similar skills to those used in the oil and gas sector. So it is about building on previous technologies and skills and adapting them to new opportunities – whilst also looking ahead to provide the right skills opportunities for young people, through projects like our skills bootcamps.” 

At Blyth, another promising zero-carbon project is taking shape on the site of a former coal-fired power station. The Britishvolt Gigafactory, the first of its scale in the UK, aims to produce enough lithium-ion batteries for 300,000 electric cars every year by 2027, and create 3,000 jobs by 2028. 

“The opportunity is immense,” says Hamilton. “We can create a lot of highly productive, well-paid jobs and help close the unemployment gap. This region has previously exited crises with additional unemployment compared to other areas.  

But, given the levels of investment in low carbon energy which we are currently seeing, it is possible that the opposite will be true as we emerge from the pandemic.” 

To help kickstart the Britishvolt Gigafactory, the government’s Automotive Transformation Fund invested £100m, and it is these types of funds that can help to de-risk new energy transition infrastructure and attract further private capital. 

Meeting the targets set by Levelling Up and the Net Zero Strategy requires two things: private sector investment and an enabling environment created by government. That enabling environment includes capacity for planning and modelling, an education system that gives young people the skills needed in the new economy, de-risking huge infrastructure and manufacturing projects, and public infrastructure, including electricity grids. 

In Scotland, regulatory changes and government support have helped the renewables sector to scale up and support supply chain and critical infrastructure growth, giving new life to the slowly declining oil and gas industry in the North Sea. 

If the right things are incentivised, then funding for renewable energy is not an issue, says Claire Mack. “The scale of the opportunity is unprecedented in Scotland. It would be very hard to make a bad investment in physical infrastructure at the moment. There are multiple mechanisms now, including Contracts for Difference and Power Purchase Agreements, which are gaining traction because of the overall ESG agenda. 

“It’s about making sure that public infrastructure grows in tandem,” she adds. “Aligning with local authorities and planning committees is an enabler, and electricity grids must be ready to take that massive upswing in generation.” 

Jim Coleman believes a successful green economy is only possible if local and sub-regional government are involved in funding decisions and resources are readily deployable at a local level. “Shifting the focus to support sub-regional initiatives means that locally specific solutions can be developed, making net zero goals more accessible and relevant to local populations,” he says. “The government must provide opportunities for businesses to succeed locally, regionally and nationally – by establishing effective and efficient infrastructure, supporting new industries and product development and skilling up local workforces.” 

The partnership approach does not have to start with a huge project, says Guy Jefferson, COO of SP Energy Networks. “Nothing is more effective than an actual project,” he says. “We’ve come together with Glasgow City Council and other partners to deliver a number of projects on the ground. The scale’s not big enough yet, but it’s showing that it can be done. Now, we take the learnings from each project and build the scale. That will also attract investors.”  

Ambition and collaboration will build on progress 

Individually, the Levelling Up agenda and the Net Zero Strategy are investments in the future of the UK’s prosperity. Together, they can be mutually reinforcing.  

War in Ukraine and soaring energy costs are destabilising the global economic outlook, but there is a window of opportunity for the UK’s regions to invest in net zero. Current energy transition projects are showing us what is possible: they are creating jobs, promoting skills development and generating investment opportunities across the economy. To move them forward will take strong collaboration between the private sector and enabling, co-investing government bodies. Get that right, and citizens, businesses and the environment will all be the winners. 

Want to find out more about delivering local economic growth as part of the energy transition, visit: wsp.com/energyeconomiesuk