By William Schomberg
LONDON (Reuters) -Britain requires tens of billions of pounds of extra infrastructure investment each year between now and 2050 to meet the challenge of climate change and narrow the economic gulf between its rich and poorer regions, government advisors said.
As well as new power networks and rail, road and broadband upgrades, big subsidies will be needed to replace domestic gas boilers with heat pumps which poorer households should receive for free, the National Infrastructure Commission (NIC) said.
It also called on Britain to adopt longer-term thinking after sharp swings in public investment budgets and U-turns on projects such as the High Speed 2 railway which was chopped in half by Prime Minister Rishi Sunak this month, a few weeks after he pushed back a ban on the sale of new petrol cars.
“We stand at a pivotal moment in time, with the opportunity to make a major difference to this country’s future,” Commission chair John Armitt said in an introduction to the NIC’s recommendations. “But we need to get on with it.”
Britain, like many other countries, is trying to work out how it will pay to overhaul its economy in order to meet its net zero targets. An investment surge could also help it speed up the slow pace of economic growth over much of the past 20 years.
But the country’s tax burden is already its highest since the Second World War and public debt has surged to almost 100% of economic output after huge handouts to households during the COVID-19 pandemic and the 2022 surge in energy costs.
The NIC said Britain would need combined public and private sector investment of 70-80 billion pounds ($85-97 billion) a year in the 2030s, up from around 55 billion pounds a year over the last decade.
Within that total, public investment should increase by 50% to 30 billion pounds a year. The government has said it will spend that amount but its commitment is only until 2035.
In the 2040s, total annual investment needs would drop only slightly to 60 billion to 70 billion pounds a year, the NIC report said.
Armitt said the need for action was increasingly urgent as Britain had to be a long way down the road to decarbonising by 2035 in order to hit its net zero target in 2050.
“In infrastructure terms, 12 years is not a long time,” he said. “Alongside this there is pressing need to improve productivity and fix decades of economic disparity between regions.”
Gas boilers, which currently heat around 88 per cent of English buildings, need to be phased out and replaced by heat pumps. Around eight million additional buildings will need to switch to low carbon heating by 2035, and all buildings by 2050, the report said.
The high upfront costs of heat pumps requires government support which should fully cover the outlay for lower income households and provide other households with 7,000 pounds of support each, the NIC report said.
However, Jon Butterworth, CEO of National Gas, which owns and operates the national gas network, said replacing gas boilers with heat pumps in 23 million homes was “impractical and unaffordable”.
While efficient, heat pumps cannot generate the same amount of thermal energy as gas boilers. “I worry hundreds of thousands of people made to have heat pumps will be cold,” he added.
Among other recommendations for the power sector was the creation of a new strategic energy reserve to help the economy cope with shocks such as Russia’s invasion of Ukraine last year which caused gas prices to skyrocket.
Around 20 billion to 35 billion pounds a year of private investment would be needed annually in renewable generation capacity and flexible sources of generation, electricity networks, hydrogen generation, storage and networks and carbon capture and storage.
The report’s rejection of hydrogen as an alternative to heat pumps for household heating drew an angry response from a trade union representing energy workers.
“Ripping out the gas network for 25 million homes is expensive stupidity when existing pipes can be re-purposed to carry hydrogen,” GMB National Secretary Andy Prendergast said.
The NIC publishes its recommendations – which are not binding on government – once every five years.
($1 = 0.8213 pound)
(Writing by William Schomberg; additional reporting by Nina Chestney; editing by Christina Fincher)