Madano Policy Brief – Energy Security Strategy  
Written on April 7, 2022 by Harry Spencer and James Watson
     
Energy Strategy Analysis 
The new UK Energy Security Strategy has been formally launched by the Prime Minister, after much media trailing. The strategy sets a highly ambitious mission for the UK – to produce 95% of electricity from low carbon sources by 2030.   

At its heart lies an accelerated transition to renewable power, with targets to produce 50GW of offshore wind power by 2030, including a specific target of 5GW for floating offshore wind, and a doubling of the target for low carbon hydrogen production to 10GW. Regulatory barriers to wider deployment of solar and onshore wind will also be reviewed, with the strategy noting that solar could be a greatly expanded role in the future energy system. 

A significantly expanded role for nuclear is the other key pillar of the strategy, which commits to producing 24GW of nuclear power by 2050, from a mix of both small modular reactors and large conventional nuclear projects. To deliver this vision, a new body, Great British Nuclear will be set up to help bring forward new projects, and a Future Nuclear Enabling Fund will also be launched. 

The strategy also endorses a new licensing round for North Sea oil and gas projects, and development of a new taskforce to support these developments, in the knowledge that the sector has a vital role to play while this transition is in progress.   

Fundamentally, the thrust of the new energy system envisaged are in line with previous government strategies, such as the Ten Point Plan. What is new is the proposed pace, and scale, of change. The government estimates the new strategy will generate 40,000 additional jobs in comparison to previous policy, and support 480,000 low carbon industry jobs in total by 2030. 

But major questions hang over the strategy.  

First, will the Treasury provide the financial firepower required to turn these targets into reality? From what has been seen so far, the strategy is light on specific financial commitments. This likely reflects internal departmental wrangling, and particularly Treasury scepticism. If so, this could undermine the strategy’s overall achievability. 

Second, and maybe ultimately more significant: does this government – and potentially its successors given the timeframes involved – have the political will to see the strategy through when the going gets tough? The difficult political reality is that households across Britain will see massive energy price increases in the short-term, while this strategy will take years – decades, even – to deliver. The government may find itself under further pressure, soon, to do more to alleviate those short-term cost impacts which could, in turn, sap its political willpower to see through the longer-term strategic plan.  

Delivering Britain’s new Energy Security Strategy will transform the energy landscape across the UK if its ambitious goals are made reality. Whether the government’s actions can match its rhetoric remains to be seen. 

 

 

Specific Announcements 
The Energy Strategy features several key announcements for the sector, including: 

Nuclear 

  • The Government has set a nuclear generation target of 24GW by 2050, representing up to around 25% of the UK’s projected electricity demands. It intends to take one (undisclosed) project to FID in this Parliament (2019-2025) and 2 projects in the next, including small modular reactors (SMRs) and subject to value for money and relevant approvals. 
  • This pipeline will sit alongside existing investment of over £2bn this Parliament in new nuclear, including £100m to support the development of Sizewell C, and £210m to bring through SMRs. The Government will also launch the £120m Future Nuclear Enabling Fund this month (April 2022).   
  • A new development body, ‘Great British Nuclear’ (GBN), will be created to support the development of new projects, backed by substantial but currently undisclosed funding. GBN will be responsible for identifying new sites, speeding up the planning process, and bringing together private firms to run each site. 
  • As part of this process, the Government expects to initiate selection of further UK projects in 2023, with the intention that it will enter negotiations with the most credible projects to enable a potential government award of support as soon as possible, including (but not limited to) Wylfa. As part of this, the government will consider the role that it can play in financing new projects. 
  • The Government will also work to collaborate further with other countries to accelerate work on advanced nuclear technologies, including both Small Modular Reactors and Advanced Modular Reactors (AMRs). 

Hydrogen  

  • The Government has confirmed its ambition to double its 5GW low-carbon hydrogen target to 10GW by 2030, with at least 50% of this new capacity coming from electrolytic-hydrogen production and using excess offshore wind power to drive down costs.     
  • It will also aim to run annual allocations rounds for hydrogen, moving to price competitive allocation by 2025 as soon as legislation and market conditions allow, so that up to 1GW of electrolytic hydrogen is in construction or operational by 2025, with up to 2GW of production capacity overall (including CCUS-enabled hydrogen) in operation or construction by 2025. 
  • There is a commitment to design, by 2025, new business models for hydrogen transport and storage infrastructure, which will be essential to grow the hydrogen economy and provide security for producers and consumers. 
  • A hydrogen certification scheme by 2025, will support the export and import of hydrogen through set standards that will enable UK companies to compete, globally, it will also examine port infrastructure to ensure interlockers and gas terminals are “hydrogen-ready.”   
  • The Government will ensure consideration is given to the siting of electrolysers to best use the anticipated, surplus, low carbon electricity and reduce potential network contains.  
  • Finally, the BEIS Hydrogen Economy Team has confirmed, separately, that it will shortly publish its Hydrogen Investment Package, which will contain the Hydrogen Investor Roadmap and the following government responses on the: 
    • Hydrogen Business Model 
    • Net Zero Hydrogen Fund 
    • Low Carbon Hydrogen Standard  

Carbon Capture and Storage (CCS) 

  • The Government has reiterated its plans to delivery on its £1bn commitment to 4 CCS clusters by 2030, with the first 2 sites selected (HyNet and East Coast Cluster) and the Scottish Cluster in reserve.   
  • This month (April), it will also publish delivery roadmaps for CCS and hydrogen to provide clear signals to industry and enable further investment.  

Oil and Gas 

  • The Government intends to launch a licensing round for new North Sea oil and gas projects in the Autumn of 2022. This will consider the forthcoming climate compatibility checkpoint and the need for energy security.  
  • Alongside this intention, it will set up Gas and Oil New Project Regulatory Accelerators to provide dedicated, named project support to facilitate the rapid development of projects and, potentially, reduce timelines. 
  • Confirmed that it will proceed with its commissioning an impartial technical review on shale gas by the British Geological Society to consider any further scientific updates on seismicity that government ought to consider. The Government is keen to note that any exploration or development of shale gas would need to meet rigorous safety and environmental protection both above ground and sub-surface 

Offshore and Onshore Wind 

  • A new target of 50GW of offshore wind capacity by 2030, which is a significant increase on the 11GW deployed to date. According to Government figures, this will be more than enough to power every UK home. 
  • Of this 50 GW by 2030 commitment, the Government would like to see 5GW being composed of floating offshore wind in deeper seas.   
  • To radically accelerate the speed of deployment, the Government will also reduce consent time from up to four years to one year, strengthen the Renewable National Policy Statements to reflect the importance of energy security and net zero, and will work with the Offshore Wind Acceleration Task Force to cut deployment timelines. 
  • The Government will also implement a new Offshore Wind Environmental Improvement Package including an industry-funded Marine Recovery Fund and nature-based design standards to accelerate deployment and will introduce strategic compensation environmental measures including for projects already in the system to offset environmental effects and reduce delays to projects. 
  • Offshore wind will also be supported by establishing a fast track consenting route for priority cases where quality standards are met, by amending Planning Act 2008, and by guaranteeing continued participation in CfD auctions for the sector.  
  • On onshore wind, the Government will consult this year on developing local partnerships for a limited number of supportive communities who wish to host new onshore wind infrastructure in return for benefits, including lower energy bills. The consultation will consider how clear support can be demonstrated by local communities, local authorities and MPs. 
  • Onshore wind will also remain eligible for CfD auctions, and the Government will look at options to support the upgrade of existing sites. 

Solar 

  • The Government’s strategy ‘anticipates’ a five-fold increase in deployment by 2035, to 70GW, but does not set a formal target. 
  • To enable growth of solar, the Government will “consult on amending planning rules to strengthen policy in favour of development on non-protected land, while ensuring communities continue to have a say and environmental protections remain in place.” The strategy notes that large scale projects will continue to be encouraged to locate on previously developed, or lower value land, and co-location with other energy technologies will be encouraged. 
  • For rooftop solar, the strategy commits to radically simplifying planning processes with a consultation on relevant permitted development rights and to consider the best way to make use of public sector rooftops. 

Networks 

  • The Government will establish a Future System Operator as soon as practicable to drive the transition and oversee the UK energy system. 
  • A strategic framework will be published this year with Ofgem for how networks will deliver net zero. 
  • An Electricity Networks Commissioner will be appointed to advise government on policies and regulatory changes to accelerate progress on network infrastructure. 
  • A blueprint for the whole system will be published by the end of 2022 in the Holistic Network Design (HND) and Centralised Strategic Network Plan (CSNP). The HND will identify strategic infrastructure needed to deliver offshore wind by 2030. The National Policy Statements will also be updated to recognise these blueprints in the planning system, increasing certainty for the planning inspectorate, developers and other stakeholders. 
  • Government will set out the importance of strategic network investment in its forthcoming Strategy and Policy Statement for Ofgem. 
  • The Government will work with stakeholders to increase pipeline visibility and accelerate procurement timelines, and with Ofgem to speed up connections to local distribution networks. The Government and Ofgem will also collaborate to reduce timelines for delivering strategic onshore transmission network infrastructure by around three years and to identify further opportunities to accelerate development. 
  • The Government will consult on community benefit options to ensure local residents benefit from energy projects.  

Heat Pump Manufacturing  

  • The Government will run a Heat Pump Investment Accelerator Competition in 2022 (no exact times provided) that will be worth up to £30m to build heat pumps in the UK and reduce demand for natural gas for home heating.  

Industry  

  • To support industry struggling with high energy costs, the Government will also extend the Energy Intensive Industries Compensation Scheme for a further three years.  

 

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