The cross-party Business, Energy and Industrial Strategy Select Committee has warned that the UK Government’s plan is set to fail to generate enough electricity from fossil fuel free sources by 2035, risking the country’s security of supply and its ability to meet its net zero target. Its report on Decarbonising the UK Power sector says that ‘the absence of strategic leadership from Ministers and the lack of a coherent, overarching plan to deliver national targets undermines our ability to reduce our dependence on imported expensive fossil fuels for electricity’. And it warns that funding for renewables was under threat as the UK’s attractiveness for investment in low-carbon technologies has ‘deteriorated’.
The report suggests that investor confidence has been hit by policy instability, including windfall tax exemptions that favoured fossil fuels; failure to tackle rising development costs; 15-year delays to connect to the grid, and a cumbersome planning regime. So the committee wasn’t too happy, and a separate report, indicating that UK renewable investment has fallen by 10% over the last year, won’t have changed that.
The Select Committee has clearly taken a critical look at the government policies and plans on renewable energy. It says there have been some successes: ‘CfD cost reduction has been most noteworthy in the offshore wind sector, which has seen strike prices fall from £150 per MWh to £37 per MWh in less than a decade. A £37 auction strike price (achieved at Allocation Round 4 in 2022), when adjusted for inflation, is currently worth £46.24, around a third of the current average wholesale day ahead reference price’. However, it says ‘this is based on bid prices for projects that are a number of years from completion. According to Energy UK, overall costs for renewables developers have risen by 20–30%, with some developers reporting cost increases of up to 50% for specific projects. These increases have been caused by a variety of factors, including higher commodity costs, rising costs for wind turbines and solar panels, increased supply chain and deployment costs (for instance from installation vessels in offshore wind to legal and professional services fees), higher operations and maintenance costs, currency changes and more complicated trading arrangements, and increased cost of capital’.
So offshore wind is not now going quite so well in the UK. The report does note Offshore Renewables Catapult’s estimate that, with the potential of floating offshore wind, at least 600 GW of offshore wind could be deployed in UK waters, but the Committee says ‘unless rapidly addressed, current bottlenecks in the process will stand in the way of the Government achieving its ambition for 50 GW of offshore wind to be deployed by 2030.’
Indeed, in general, it says there are policy and planning problems with most renewables, including solar, although the Committee seems reasonably confident about the government target for 70 GW of solar to be installed by 2035. A bit surprising that, even if it is what Germany has already done. But the report notes that the British Energy Security Strategy ‘did not include a target for onshore wind, even though it is one of the cheapest and quickest sources of renewable electricity to deploy’. That has to change! It notes that ‘The Government has consulted on making its planning rules for onshore wind in England less restrictive, but it is not clear that the proposals will unlock significant opportunities.
It says, by contrast, ‘the UK currently relies on unabated biomass for a large portion of its electricity and has spent billions subsidising the sector, but these plants have significant lifecycle emissions. The Government plans to use carbon capture & storage (CCS) to decarbonise bioenergy (BECCS), but whether this could be achieved sustainably is uncertain’.
It is however more certain that the UK will ‘need hydrogen and gas CCS to provide flexible sources of energy. The Government has recently announced that £20 billion will be allocated to support the development of CCS, but it has not set out how this will be paid for. The availability of low-carbon hydrogen will be constrained in the near-term, which may risk an over-reliance on fossil fuel based hydrogen.’
On energy storage, it notes that ‘there is currently no policy to support the deployment of long-duration energy storage’; and on energy demand it says that ‘while reducing demand should be at the heart of the transition to a decarbonised power system, existing energy efficiency programmes are not operating at sufficient scale and the Government’s additional £6 billion of funding for energy efficiency is not available until 2025’. More demand-side action is vital and on the supply side, in terms of new approaches, it says more attention should be given tidal power. Although it is still expensive, that could change and would add to diversity.
Finally, the Select Committee reports that ‘the British Energy Security Strategy included “an ambition” for the UK to produce “up to 24 GW” of civil nuclear power by 2050. This could mean that nuclear energy would provide up to 25% of the UK’s electricity,’ but it notes that ‘24 GW is more than double the 10 GW of nuclear power the Climate Change Committee (CCC) expected under its central pathway for how the UK can get to net zero by 2050 in the most cost-effective manner.’ It adds, a bit oddly, ‘a low-carbon, reliable power supply is possible without nuclear energy, but the UK would need to deploy more storage and low-carbon alternatives which are at an earlier stage of development (e.g. gas CCS and hydrogen)’. Well, SMRs are not exactly two a penny! Though they might, it says, be more flexible. But it wants to know how the government plans to finance its 24 GW ambition, including whether future projects will use the Regulated Asset Base model. It says ‘there is a lack of clarity on where the private finance for projects will come from and how delays and cost overruns will be addressed.’
Overall it is quite a challenging report. It calls on Ofgem to retrospectively audit the certificates presented by Drax for the payment of Government subsidies, citing concerns about evidence under-pinning the statements that verify the source of wood pellets burnt at Drax’s facilities. A big issue for them and possibly for BECCS. As well as calling for planning to be reformed to enable a substantial increase in onshore wind development in England, the Committee calls on Ministers, Ofgem and network owners to step up investment in grid upgrades to help reduce grid congestion and curtailment: it wants the current first come, first served model to secure a connection to the grid to be overhauled. The government has until June to respond to the overall package. The Trade body Energy UK said the government needs to ‘quickly acknowledge and respond to the challenges that have grown for low-carbon developers’. Quite so.
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