Following the conclusion of the bidding process in February, the Budget 2021 announced the location of eight new Freeports in England which, subject to completion of business case assessments, are due to begin operations later in 2021. The Scottish Government are looking to create their own “green ports” initiative north of the border in a similar vein.
The successful England-based bids are: East Midlands Airport; Felixstowe and Harwich; Humber; Liverpool City Region; Plymouth; Solent; Thames; and Teeside. The successful bidders will now be expected to prepare an outline business case setting out further information on how their Freeports proposal will be delivered, including the allocation of seed capital, allocation of technical and capacity support, definition of the zones in which tax relief will apply, confirmation of local commitments regarding planning, funding and other resources, and an assessment of the environmental impact of their proposals. The Government will assess the business case and will use this to determine how much seed funding should be allocated to each Freeport.
By way of reminder, a Freeport is a secure customs zone, located at a port (whether sea, air, or rail), which benefits from different (typically relaxed or reduced) customs rules, tax duties and administrative burdens, despite being located within a country’s land border (see our previous article for an introduction to freeports and the key issues here).
In its support of Freeports, the Government has emphasised the potential benefits, including simplified planning, reduced tax and customs duties, job generation, and “levelling up” across the regions. We have previously discussed the potential implications for planning reform, given the Government’s intention to use Freeports as an opportunity to “test ambitious planning proposals” with a view to increasing flexibility and streamlining the planning process (see our previous article on freeports and planning reform here). Successful bidders will need to work with the relevant local planning authority to deliver suitable Local Development Orders or “LDOs” to facilitate flexible, ‘zonal’ planning at Freeports. The majority of the potential planning reforms identified by the Government and discussed in our previous article are still awaited: the National Policy Statement for Ports has not yet been reviewed, and the permitted development right amendments have not yet been introduced.
But, looking at the chosen locations of the eight Freeports, one of the most important benefits is likely to be their facilitation of the delivery of renewable energy projects through the creation of “green” industrial clusters or hubs, including for carbon capture and storage (CCUS) projects (more on which here).
In our previous article, we discussed the capacity of Freeports to support the green energy transition (here). While all Freeports could, in one way or another, be said to support the green energy transition given the general direction of travel of UK industry, of the eight Freeport locations, some stand out as particularly relevant to the renewables industry - the obvious examples being Humber and Teeside given their proximity to major offshore windfarms.
A renewable energy hub at a Freeport could bring the following benefits:
Tax on an assembled product: the suspension of duties on goods imported to Freeports and the establishment of industrial ‘clusters’ at Freeport sites means that tax could be paid on a final, assembled product upon its entry to the UK market, rather than on each individual component upon importation. This could have major implications for the delivery of cheaper renewable energy projects, such as offshore windfarms or supporting the development of CCUS infrastructure, particularly if coupled with strong supporting infrastructure.
Co-location of the supply chain: flexible regulation and reduced duties would draw more businesses to Freeports, thereby facilitating the co-location (and the increased efficiencies that flow from that co-location) of the various different links in the supply chain of a renewable energy project.
Co-location of processes: similarly, the creation of an industrial cluster at a Freeport would facilitate the co-location and interaction of the different technologies and processes forming part of renewable energy projects. For example, a hydrogen production facility, powered by a wind farm, exporting its CO2 to a carbon capture and storage project, could all be located within a single Freeport.
Innovation and ‘green tech’: decreased or flexible regulation would allow Freeports to function as a ‘regulatory sandbox’, providing space for innovation and experimentation in the ever-growing and changing world of ‘green tech’.
Freeports are not without their issues, and the Government has been criticised for “greenwashing” the potential benefits. But, Freeports could represent a serious boost to the renewable energy industry. Selecting Freeports with strong links to the renewable energy industry was a strong first step in this direction. With Freeports due to become operational later this year, the reality behind the Government’s rhetoric will soon begin to take shape.