The political crisis may have blanked out the latest twists and turns in energy debate, but as I reported in my last post, radical changes had been prefigured in media speculation about the upcoming Energy Security Bill. Raising the temperature further, the Committee on Climate Change noted that that UK emissions rose 4% in 2021 compared with 2020, as the economy began to recover from the pandemic, and said that, although a solid Net Zero strategy was in place, ‘greater emphasis and focus must be placed on delivery’. The Net Zero Strategy ‘contained warm words on many of the cross-cutting enablers of the transition, but there has been little concrete progress’.
There was also a lot of lobbying on specific policies. For example, RenewableUK set out a Roadmap to net zero: a manifesto for a fully decarbonised power system by 2035, calling for the Contracts for Difference system to be reformed so as attract more investment, particularly in supply chains. It said that, though the CfD mechanism has delivered new renewable capacity, the current market set up ‘may not be enough to deliver the volume of projects needed to fully decarbonise by 2035, as surging global demand for offshore wind is increasing competition for investment and putting pressure on supply chains’. It said ‘these global pressures, combined with maturing technology, means that the trend of ever cheaper prices may be at an end’. And it argued that an ‘evolution’ of the CfD was needed to incentivise long-term capital investment in major projects and build up supply chains so as to continue to provide consumers with clean energy at low and stable prices.
In parallel, in a key paper in Nature, CREDS, the Centre for Research into Energy Demand Solutions, pushed hard for more attention to be given to cutting demand. It claimed that ‘without energy demand reduction, short-term climate targets are unlikely to be reached and long-term net-zero ambitions will need to rely on expensive and unproven CDR technologies, increasing the risk of failing to achieve the global goals of the Paris Agreement’. It said that ‘energy demand in the UK could be reduced by 52% by 2050 - compared with 2020 levels - without compromising on quality of life’.
However, when the Energy Security Bill finally emerged on 6th July, very little of this seems to have got through. Although it did try to revamp parts of the energy market, overall it was, arguably, rather limited, certainly compared with the French decision announced on the same day to fully nationalise EDF!
The details
It may have got lost in the political/media noise about ministerial resignations, but in his statement at the launch of the Bill, Energy Secretary Kwasi Kwarteng was very upbeat: ‘To ensure we are no longer held hostage by rogue states and volatile markets, we must accelerate plans to build a truly clean, affordable, home-grown energy system in Britain. This is the biggest reform of our energy system in a decade. We’re going to slash red tape, get investment into the UK, and grab as much global market share as possible in new technologies to make this plan a reality. The measures in the Energy Security Bill will allow us to stand on our own two feet again, re-industrialise our economy and protect the British people from eye-watering fossil fuel prices into the future.’
That did sound promising. But much of what emerged in the Bill itself was arguably not very new. Basically it just rehashed the commitments in the Energy Security Strategy, the Prime Minister’s Ten Point Plan and Net Zero Strategy to drive £100 bn of private sector investment by 2030 into new industries, with the aim of supporting ‘around 480,000 clean jobs by the end of the decade’. Fair enough as general aims, though there was not very much new on how to make it happen. But it did include some sensible specific ideas, like the (actually already announced) plan for OFGEM to oversee regulation of the heat networks market, so as to ensure that consumers are charged a fair price, including ‘by enabling the regulator to investigate disproportionate prices and take enforcement action’. There were also some other sensible adjustments to regulator frameworks and price caps, though nothing very dramatic. For example, there had been talk of letting homeowners who agree to wind farms being built in their area have their bills reduced. But there was no sign of that in the bill, although it does talk of other consumer protections and of ‘creating more competition in our electricity networks to deliver bill savings’, of ‘up to £1 bn’ for onshore projects tendered over the next 10 years.
Although the 50GW of offshore wind 2030 target in the Zero Carbon policy clearly sets the scene, there was nothing new directly on renewables, or efficiency, in the Bill outline. Instead, it focussed on CCUS , hydrogen, storage and heat pumps- as well as nuclear. The Bill will ‘introduce state of the art business models for carbon capture usage and storage (CCUS) and hydrogen, attracting private investment by providing long-term revenue certainty. Together with the measures on CO2 transport and storage, this will put the country on a path to seize market share & grow the economy’. It will also take further steps ‘to explore the role for hydrogen to heat our homes and workplaces. We will enable the delivery of a large village hydrogen heating trial by 2025, providing crucial evidence to inform strategic decisions in in 2026 on the role of hydrogen in heat decarbonisation.’
It will also ‘scale up heat pump manufacturing and installation, and a new white goods industry in the UK. We will establish a market-based mechanism for the low-carbon heat industry to step up investment and lower the cost of electric heat pumps, through economies of scale and innovation’. And it will ‘facilitate the deployment of electricity storage, such as batteries & pumped hydro storage, by clarifying it as a distinct subset of electricity generation’.
And finally, the bill will ‘prepare for our nuclear future and clean up the past’. It will ‘facilitate the safe, and cost-effective clean-up of the UK's nuclear sites, ensuring the UK is a responsible nuclear state by clarifying that a geological disposal facility located deep below the seabed will be licensed’ and ‘strengthen the Civil Nuclear Police’s powers to help keep Britain safe’, by introducing legislation ‘to enable the Civil Nuclear Constabulary to utilise their expertise in deterrence and armed response to support the security of other critical infrastructure sites’. And it will ‘make the UK the first country to legislate for fusion, providing clarity on the regulatory regime for fusion energy facilities.’
Reactions
National Grid said ‘the Energy Security Bill builds on the positive steps the government outlined in its British Energy Security Strategy. We look forward to continuing to work together with Government to realise its bold net zero goals including delivering 50 GW of offshore wind power by 2030 and establishing an independent system operator and planner’. And RUK seemed to like it, despite the lack of the CfD revisions it has sought. But although BusinessGreen reported general approval for the Bill, it also relayed the concerns of some about the proposed constraints on objectors. Though perhaps the biggest worry is whether there will be a government left to get the Bill through parliament!
Meanwhile, also a bit lost in the media frenzy over Boris Johnson's demise, the results of the next round of the CfD have been announced, with 7GW of offshore wind at an all time low strike price of £37.35/MWh, 66 solar farm projects at £44.99/MWh, plus, at last, some on-shore wind, at £42.47MWh, but only in Scotland! And 4 tidal stream projects- at £178.54/MWh. A way to go on that.
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