Industry

Mixed Reception for UK Government’s Energy Security Strategy

Plans include the expansion of oil, gas and nuclear. 

The British Energy Security Strategy has “missed the mark”, according to Eduardo Monteiro, Co-CIO of Victory Hill Capital Advisors, a private equity and infrastructure investment manager.  

“As ever, we continue to see misplaced trust in nuclear energy and an overdependence on intermittent power in the wider push to net zero,” he said. 

The strategy, released just two days after the Intergovernmental Panel on Climate Change’s Working Group III report, sets out the UK government’s plans for greater energy independence. The strategy “could see 95% of Great Britain’s electricity set to be low carbon by 2030”, said the government. 

Ambitions include ramping up nuclear power to 24GW by 2050 (25% of projected electricity demand), underpinned by the £120 million Future Nuclear Enabling Fund and a commitment to build the ‘equivalent’ of one reactor a year, “rather than one a decade”. A new organisation, Great British Nuclear, will be set up to bring forward new projects, backed by unspecified “substantial funding”. 

Monteiro described the government’s focus on nuclear as “hugely problematic”, adding that the strategy reaffirms a broader assumption that nuclear is not harmful.  

“While nuclear does not emit CO2 at the point of energy generation, it is far from green with regards to the extraction and disposal of its fuel source, and likewise in the materials used in construction of plants. We must be more innovative.” 

Instead of nuclear, distributed generation through microgrids and behind the meter solutions using existing renewable technologies such as solar, wind and batteries should be prioritised, he added. 

“Other technologies including carbon capture and storage should also be supported. These can all provide reliable energy and can reduce energy bills in scale and crucially be delivered in far shorter time horizons than the ten years needed to build a nuclear power plant.” 

Wind and renewables “can and must play a part” in the net zero transition, but their shortcomings in terms of intermittency must be recognised, said Monteiro. “The UK’s energy strategy needs a lot more innovation and joined-up thinking to achieve net zero and cheap energy in the near term.” 

Alternative energies 

The government said it would also accelerate the deployment of wind, solar and hydrogen while supporting the production of domestic oil and gas in the “nearer term”. The ambition is for 95% of electricity to be low carbon by 2030.  

A licensing round for new North Sea oil and gas projects is expected to be launched in Q3 2022, with a new task force providing bespoke support to new developments. 

Under the strategy, offshore wind will increase to 50GW capacity by 2030, 5GW of which will come from floating offshore platforms in deeper seas. The plans for onshore wind in the strategy were less concrete.  

Other measures announced included a competition for British-made heat pumps funded by a £30 million heat pump investment accelerator. On solar, the government aims to increase the current capacity of 14GW by five times by 2030. The government also plans to double its ambition of up to 10GW of low carbon hydrogen production capacity by 2030, with at least half coming from green hydrogen initiatives. 

Sam Tye, Green Energy Partner at law firm Fladgate, said the strategy included “welcome news” to those operating in the offshore wind, nuclear and green hydrogen industries. For onshore wind, solar and battery storage, however, the strategy provides little opportunity.  

“For those in the battery storage sector looking for good news in the strategy, well there was no mention of battery storage at all (except those in electric vehicles),” Tye said. 

With the introduction of annual contracts for difference (CfD) auctions, there should be further acceleration in the development of renewable energy generation, said Maryam Adamji, Managing Associate in law firm Linklaters’ Energy & Infrastructure practice. “The UK Government will also be hoping to replicate the success of the renewables CfD in new areas such as low carbon hydrogen.” 

Muted optimism  

The Climate Change Committee (CCC) will review the Energy Security Strategy as part of its annual Progress Report to Parliament in June.  

CCC Director of Analysis, Mike Thompson, said the government had for the first time made commitments that go beyond CCC’s proposals on offshore wind, nuclear and hydrogen. “The new commitments are hugely ambitious – they would see the UK produce more electricity from offshore wind in 2030 than it has produced from gas in any year in history. Government, business and industry will need to focus relentlessly on delivery at a scale and pace as yet unseen.” 

He also expressed disappointment that despite these commitments, there was little in the strategy regarding energy efficiency and on supporting households to make changes that can cut their energy bills now.  

Rachel Stonehouse Policy Fellow at the Institute of Materials, Minerals and Mining, noted that, while the ambition of 95% low-carbon electricity by 2030, improved targets and a drive to accelerate planning consents were encouraging, the announcements “so far leave much to be desired in terms of new policy measures or an uplift in funding.”  

Like Thompson, she expressed disappointment in the lack of action on energy efficiency “despite having potential to contribute significantly to this agenda”.  

“Transitioning to a low-carbon, resource efficient society will play an essential role in improving the UK’s energy security. It is important therefore, that implementation of the net-zero strategy remains a focus point across government,” she said. 

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