The Government has set out its strategy for how the UK will accelerate homegrown power for greater energy independence in a new policy paper. But what does it mean for the South West and the transition to net zero?
Peter Kydd, South West Infrastructure Partnership Chair and energy sector representative, sets out SWIP’s response and considers the regional implications.
The British Energy Security Strategy comes less than two years after the Prime Minister launched his Ten Point Plan, which was quickly followed by the Energy White Paper. The fact that these documents needed updating so soon is telling of the Government’s approach to energy in recent years, and the latest strategy does little to suggest that it won’t need further updating within the next two years. There are some good elements within all these documents but there are also glaring omissions and the overarching impression is that energy strategy is being developed on the hoof, reacting to global events and highlighting the short term approach since privatisation of the power sector in the late 1980s.
How does the new energy security strategy affect the South West?
The strategy is presented as a set of Government ambitions for the energy sector and acts as an invitation to the market to rise to the challenge of delivering it, facilitated in some circumstances by government support. The support is somewhat limited and unclear, perhaps because two new organisations are being established to determine what is needed. The first is a new independent public body called Future System Operator (FSO), which will provide overall oversight and planning of the energy system, with the National Grid’s Energy System Operator (ESO) at its core. In addition, Great British Nuclear, a new government body, is being established to bring forward the plan for a new nuclear reactor to be delivered at a rate of one a year rather than one a decade. Continuing on these positive steps, an Electricity Networks Commissioner will be appointed to advise Government to accelerate progress on network infrastructure. By the end of 2022, a Holistic Network Design (HND) and Centralised Strategic Network Plan (CSNP) will also be produced and the National Policy Statements updated to recognise these blueprints in the planning system.
SWIP welcomes the change in status of the ESO and believes the focus on new nuclear should also benefit the South West with its legacy sites at Oldbury and Berkeley in Gloucestershire, as well as further potential development at Hinkley Point in Somerset. There is also the STEP fusion project, Severn Edge, also based at Oldbury and Berkeley, which is in a shortlist of five for government funding. However, while we welcome the Government’s ambitions in respect of new nuclear capacity, we are concerned that timescales are unrealistic. The supply chain does not yet exist at the scale required to deliver this, an inevitable consequence of the stop-start nature of nuclear energy policy development. It was only a few months ago that the National Infrastructure Commission believed only one new nuclear power station was required in the next decade.
There will also be opportunities for the South West in terms of floating offshore wind development and potentially green hydrogen production. However, it is disappointing that one of the South West’s most important natural assets – its high tidal energy potential – is covered in just one line in a section referred to as solar and others.
Rather than itemising a list of ambitions focused on new generation capacity requirements and other forms of support, particularly for the oil and gas sector, we would prefer to have seen a more integrated approach taken by the Government, looking at demand as well as supply and broadening the diversity of the energy mix rather than making very large bets on nuclear, offshore wind, solar and hydrogen. The strategy has been rushed out in response to the current energy crisis but there are few measures within the strategy that will protect electricity consumers from increasing bills in the short term.
Short, medium and long term recommendations
SWIP’s belief is that the strategy should have addressed the following short, medium and long term elements:
Short term
- Steps to reduce energy demand through improved incentives for building insulation, particularly loft and floor insulation and double or triple glazing.
- Bringing forward plans to prevent the sale of gas boilers and strengthening the building regulations so that all new builds have zero operational carbon.
- Changing planning conditions so that solar panels on the front elevation can be fitted without requiring planning consent.
- Mandating the use of solar power roof tiles for new or replacement roof construction
- Green levies are currently allocated exclusively to the electricity consumer whereas we should be applying such levies on carbon producing gas rather than low carbon electricity as we transition to net zero. While this may not be practical at the moment because of the sharp increase in wholesale costs, the strategy should confirm the need for such a change and the transitionary arrangements necessary.
- An integrated plan of how the electricity network and generation centres should grow in the future as we transition to net zero (the strategy envisions that 95% of electricity production will be low carbon by 2030).
- More detailed consideration of where the increased revenues from rising fuel bills is going and how these could be recovered through taxation to be used to support more effectively those who can least afford to pay.
- There is some acknowledgement that the current electricity supply model, which was created by Government, has failed with large numbers of energy supply companies being bankrupted. The costs of this are at the moment borne by the electricity consumer but the strategy includes undertaking a comprehensive Review of Electricity Market Arrangements (REMA) in Great Britain, with high-level options for reform set out this summer to ensure that the retail market is fit for purpose.
Medium term
- Continued delivery of the projects in the strategy alongside consideration of how supply chains can be expanded.
- Delivery of the more difficult to achieve technologies, such as deep retrofit measures to existing buildings where justified and sustainable.
- More detailed consideration of hydrogen and where it should and should not be used. Hydrogen is not an energy source but a storage medium so requires energy to manufacture it.
- More detailed consideration of indigenous low carbon power generation technologies which have not proven economic in today’s market. This should include consideration and refinement of assessment technologies, many renewable technologies benefit from future estimates of inflation being included in assessments, but the Department for Business, Energy and Industrial Strategy (BEIS) currently excludes this from their cost of energy assessments. Interestingly, the Contract for Differences (CfD) strike price for low carbon energy includes inflation and this is one of the reasons why the strike price has reduced so significantly compared with the conventional levelled cost analyses.
- The strategy excludes any detail on tidal and wave technologies which are addressed in one line. We believe this is a major omission and that a better outcome would be to explore how these technologies could be deployed in the medium to long term, while at the same time understanding more fully the environmental impacts, the different cost and deployment scenarios and how existing commercial interests such as ports and shipping can best be protected.
Long term
- The long term plan should build on the short and medium term building blocks described above and should present a vision of how the UK’s energy system should look in 2050. It is recognised that this could be challenging and involve some difficult conversations with certain industry sectors, particularly the current gas supply industry.
- Constant review is required of longer term plans so that a gap analysis can be effectively undertaken between what is achieved in practice and what is required alongside appropriate timescales. This is particularly important given some of the ambitious targets in the strategy with little evidence of how they may be achieved.
Regional challenges and opportunities
For the South West, energy drives its economic development and a comprehensive energy plan will help local authorities and the private sector plan effectively. Without an effective regional energy plan and its objectives in terms of generation and network capacity, demand requirements and transition arrangements, a whole systems approach will be difficult to achieve. The SWIP Integrating Net Zero Route Map emphasises the need for taking a whole systems approach and using digital twins, for example, to help achieve this in practice. The preparation of a regional energy plan based on the new FSO’s oversight and planning objectives would be a good start.
Finally, there will be challenges in the South West, including the arguments for and against onshore wind and large solar farms, the expansion of nuclear, and the associated electricity transmission and distribution networks will continue with or without planning reform. SWIP supports the concept of community engagement and support for renewable energy schemes outlined in the strategy so that all stakeholders are treated sympathetically and fairly as we see the new energy revolution unfold over the next thirty years.