The Labour government has produced a Planning and Infrastructure Bill which aims to streamline approvals for major energy projects, including offshore wind, solar, hydrogen, and carbon capture- and also nuclear. A new ‘first ready, first connected’ system will replace the ‘first come, first served’ approach, which meant speculative projects could block the queue while viable project might be forced to wait. In addition, residents living within 500 meters of new electricity pylons will get up to £2,500 off their energy bills over ten years. And developers will also be required to provide local benefits, such as funding for local sports clubs, educational programmes and leisure facilities, with communities getting £200,000/km overhead electricity cable & £530,000 per substation. These ideas seemed to be welcomed.
However there has been no decision yet on what some might see as a linked issue- locational pricing, the idea that power prices should reflect local generation costs. If there’s a cheap source near you, why shouldn’t you benefit? Ofgem had come out in favour of ‘zonal pricing’, as has Octopus Energy: they point to money being wasted paying wind-farms to shut down when, for example, wind is high in Scotland and the local grid is overloaded with more power than can be transported south. But the industry trade lobby RenewableUK are very opposed to locational pricing - not least, as Ocean Winds have argued, since its seen as likely hurt new offshore wind projects. The public are also opposed, according to a new survey: there would be a ‘postcode lottery’ for consumers on bills, with only some benefitting.
Nevertheless, it’s an interesting debate, with points on both sides. As Adam Bell puts it ‘If your task is to build more renewables, you want national pricing. It’s the status quo, all our policies are based on it, and moving away from it will prompt an investment hiatus while banks figure out how price formation is going to work under the new regime….In contrast, if you want to maximise the benefits of flexibility - generators that can switch on and off, and consumers with the right assets - you want locational pricing. Prices are spikier in smaller markets, so you can make better returns’.
This issue will have to resolved soon, ideally before the next round of the CfD renewable support system. But meantime, the Planning and Infrastructure Bill will hopefully have begun to sort out some of key planning issues that have slowed renewable project deployment. For example, it aims to limit legal challenges against major projects to a single attempt instead of the current three-stage process, aiming to prevent project delays. Maybe a bit less welcome than the local cash rebate idea, with there being concerns over trampling on democratic rights and bulldozing decisions through when there may be important local environmental impact issues. But Angela Rayner, the Deputy PM , said ‘Time and again blockers have been allowed to halt progress at every turn which has weakened our energy security and left our country exposed to soaring energy bills for working people, families and businesses. This cannot and will not continue under my watch. Through our landmark Planning and Infrastructure Bill we’re taking bold action to fix the broken planning system, paving the way for us to get Britain building more vital infrastructure so our children and grandchildren can grow up in a more energy secure world’.
Will all this help the UK reach its ambitious energy and climate targets? Labour is pushing hard on net zero, and offshore wind especially, for example with a new £27m/GW Clean Energy Bonus for offshore wind in key target areas and a £57m Scottish port upgrade for floating offshore wind projects. Although not without problems (e.g. over heat pump deployment), the results of the green energy push have also, so far, been quite encouraging, with a report for the CBI claiming that the UK net zero sector has grown 3 times faster than the overall UK economy, expanding by 10% in 2024. And the new planning rules, if accepted, should help speed things up even more. But not everyone is convinced about the full plan. For example a survey found that only 16% of bosses believed UK can get to net zero by 2050, down from 45% last year. A key issue is consumer costs, but the government seems convinced that they will come down. Certainly it is good to see that fixed power surcharges (‘standing charges’) are to go: that should help the energy poor a bit. So will the proposed new block on retrospective ‘back bills’
However, that's relatively small beer. And there is still a way to go to net zero - with the next bit likely to be costly. The Climate Change Committee (CCC) says the UK should cut its emissions to 87% below 1990 levels by 2040. This target, which includes greenhouse gas emissions from international aviation and shipping, would keep the UK on track to reach net-zero by 2050. But reaching net-zero will require significant up-front investment, though CCC point out that it would also enhance energy security, cut operating costs and reduce bills, by cutting demand for imported fossil fuels. In total, the CCC says the transition would have a net cost of around £108bn out to 2050, which is £4bn per year, or less than 0.2% of GDP. As Carbon Brief noted, this is 73% lower than previously thought- under the CCC’s sixth carbon budget advice, published in 2020. Moreover, the transition to net-zero would cut average household energy bills to £700 below today’s levels by 2050 and cut household motoring costs by a similar amount. So, £1,400 in all!
That sounds very promising (if it really pans out that way), with renewable doing much of the heavy lifting, but, although the CCC forecasts an 11% reduction in industrial emissions, there will still be a need for fossil energy, and it says carbon capture and hydrogen will play important roles for industries that require intense heat and cannot easily convert to electricity. Indeed Offshore Energies UK said ‘by the time we reach our carbon reduction targets in 2050 we will still be getting 20% of our energy from oil and gas so it makes sense to produce as much of it as we can here in the UK rather than relying on more carbon intensive imports.’ That view won’t go down well with most greens- who want to see renewables and energy saving accelerated to avoid most use of fossil gas and oil, and to get to real zero as fast as possible without too much reliance on CCSs and carbon removal. The battle over Net zero, and also over specific local plans, will no doubt continue- although its political framing may be altered if some of the money earmarked for renewables ends up being siphoned off to defence. We live in troubled times…
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