15 March 2023
If you are covering the Government’s announcements on nuclear power and carbon capture and storage in the budget today, please find below comments from Tom Gilbey and Jamie Maddock, equity research analysts at Quilter Cheviot:
Tom Gilbey, equity research analyst at Quilter Cheviot:
“Nuclear can be marmite topic when it comes to energy investment, but the Government has nailed its colours to the green mast by classifying it as ‘environmentally sustainable’. There tends to be a reluctance from people to have nuclear reactors near where they live but ultimately this source of power is going to be needed if we want to get to net zero. Small modular reactors seem to be the preferred option, both in terms of pleasing residents, but also in getting up to scale quickly.
“The target of 25% of electricity being created by nuclear power is ambitious, but if the last year has taught us anything, it is that these alternative sources of power will be critical if we are to achieve a secure flow of energy that is not at the behest of geopolitical issues.
“By reclassifying nuclear power, it opens up a whole host of investment opportunities for the sector, especially at a time where some countries are decommissioning their nuclear reactors. The UK has an opportunity to become a real leader in this area of energy generation and will help make up for the lack of action previously.
Jamie Maddock, equity research analyst at Quilter Cheviot:
“Like with the announcement on nuclear energy, the Government appears to be understanding innovation and technology is one of the ways to help reach net zero. Its announcement on carbon capture and storage support will help the energy giants make further steps to the transition. With their large depleted north sea reservoirs and installed infrastructure capacity, carbon capture & storage is a big growth opportunity for the market.
“However, there is a threat being posed by the US Inflation Reduction Act as it contained significant tax credits for carbon capture and storage and could be seen as a more attractive country to do business in. With the constant tax tweaks in the UK and the ever looming threat of windfall taxes whilst the cost of living crisis persists, the government may find there is not as much appetite to invest as they may hope. The Government will need to produce a proper strategy in order to convince the energy giants that the UK is the place to unleash the capabilities of carbon capture and storage.”
