Comment
The British Energy Security Strategy: moving toward home-grown supply
Post-pandemic energy prices have been significantly inflated as markets seek to recover from the COVID lockdowns. This has only been exacerbated by Russia’s abhorrent invasion of Ukraine, which has seen supply of gas to European nations drastically reduced as a consequence of international sanctions.
In response, the Government released the British Energy Security Strategy (BESS) earlier this month, setting out their plan to produce 95% of electricity from low-carbon sources by 2030, predominantly driven by a desire to reduce imports and enhance self-sufficiency in order to ease soaring prices.
The BESS, in tandem with the 10 Point Plan for green industrial revolution and the Net Zero Strategy, is intended to drive the evolution of Britain’s energy infrastructure sector by expanding domestic supply and transitioning to renewable and low carbon sources of supply.
Overall, the BESS outlines a vision for significantly enhancing the levels of domestically produced energy from a range of technologies, which opens up a wealth of new investment opportunities.
UK future energy mix
The strategy sets out an aspiration to realise:
- 24GW of nuclear by 2050
- 50GW of offshore wind by 2030 (including 5GW of floating offshore wind)
- 70GW of solar by 2035
- 10GW of low carbon hydrogen production capacity by 2030
Nuclear
New nuclear power generation is the centre-piece of the BESS, with its ability to provide a significant and stable baseload deemed a critical component of future supply security. The ambition is for new nuclear to meet a quarter of projected national demand. This may see up to eight new reactors across the UK with the design, consenting and deployment supported by a range of fiscal incentives and regulatory changes, with the site selection process commencing in 2023.
While there is no explicit reference to the planning system, the BESS does express an intention for Government to explore the potential to combine and streamline the consenting and licensing processes for new nuclear, which may mean further amendments to the Planning Act 2008.
Offshore wind
Offshore wind is to become the backbone of the UK’s energy supply system, generating 50% of domestic renewable energy supplies by 2030. Floating offshore wind farms would open up some of the ‘windiest’ regions of British waters. In order to achieve this target, the BESS seeks to speed up the planning process, reducing the consenting period from four years to one. This will be achieved by amending the Planning Act 2008 to introduce a new ‘fast-track’ route for ‘priority cases’ which meet specific standards. It will also include new measures to review the regulatory approval process and provide projects already in the system with strategic compensation to help manage environmental impacts. The introduction of a new Offshore Wind Environmental Improvement Package which includes a Marine Recovery Fund and nature-based design standards will accelerate deployment whilst enhancing the marine environment. The detail of such measures will emerge in the coming months and it is this detail which, to a large extent, dictates the extent to which deployment can genuinely be accelerated to the degree suggested.
Solar
It is positive to see that solar power has also been recognised as a fundamental component of the future energy mix, with a five-fold increase in deployment by 2035 expected. The BESS confirms that for ground-mounted solar, the Government will consult on amendments to existing planning policy to provide further support for deployment on ‘non-protected land’ by the end of 2022. This includes promoting the use of previously developed ‘brownfield’ land or lower value land, where possible, and ensuring adequate mitigation is provided to compensate for impacts of using greenfield sites.
The co-location of solar with other functions (e.g. agriculture) and/or technologies (including onshore wind generation and battery storage) is also supported. A consultation on new permitted development rights for rooftop solar is also proposed.
Carbon capture usage and storage (CCUS) and hydrogen
The 10 Point Plan sets out the Governments’ ambition to invest in CCUS. The BESS reinforces that commitment to deliver four CCUS clusters by 2030, with the first two sites selected in the North East (‘East Coast Cluster’) and the North West (‘Hynet’) currently proceeding through Track 1.
There is also strong support for increasing and accelerating hydrogen production with 50% to be derived from electrolytic hydrogen. However, the achievement of such targets is inextricably linked to deployment of increased levels of renewable energy (“green hydrogen”) and nuclear power (“pink hydrogen”). The production capacity may be somewhat curtailed by the absence of support for new onshore wind farms (which provide co-location opportunities for hydrogen production).
Electricity transmission and storage
The BESS seeks to enhance the network infrastructure required for electricity transmission noting a commitment for delivery ahead of need where this represents the best long term solution. A Holistic Network Plan is to be prepared by the end of 2022 to define what is required to support the 2030 commitments for offshore wind, whilst the National Policy Statements will be also updated to provide greater certainty for consenting and delivery. The Government has also acknowledged the link between increased renewable power capacity and the need for long-term energy storage solutions. It is positive to note that a policy framework to support investment in energy storage technologies is proposed to be published in 2024.
Oil and gas
In addition to the expansion of renewable energy technologies, as an interim measure, the BESS proposes an additional round of licensing for North Sea oil and gas extraction to be published by the end of 2022. Gas is seen as a transition fuel on the pathway to net zero, with domestic gas supplies having a lower carbon footprint than imports and shielding the UK from geo-political instability (highlighted by the current European gas crisis). Further enhancement of domestic gas supplies could be provided by shale gas, with Government retaining an open mind around fracking. An independent review of safety and environmental consequences of this technology will be commissioned, but activity will remain paused until new evidence emerges.
Energy efficiency
Beyond the supply side measures discussed above, the BESS also recognises the importance of addressing demand and energy efficiency, with a wealth of funding and investment measures proposed. There is also a proposal to review the practical planning barriers that households can face when installing energy efficiency measures such as improved glazing, including in conservation areas, and for listed buildings. This will be completed by the end of 2022 and ensure protection of local amenity and heritage, whilst making it easier to improve energy efficiency.
So what?
After many years of indecision, the BESS demonstrates that Government is firmly in favour of a major expansion of nuclear power generation. Whilst there is a distinct absence of any formal near-term targets, actions on financing and site availability offer some additional certainty to counterbalance a historic reliance on Government, or energy consumers, shouldering the construction costs. However, whilst nuclear will provide a substantial and reliable baseload, energy production will only be realised in the long term at a cost significantly higher than other alternatives.
Significant new targets are established for offshore wind, solar and hydrogen which have the potential to deliver in the short-medium term, providing industry with an opportunity to accelerate delivery. Whilst there is the promise of a fast-track consenting regime of offshore wind it is surprising that the same has not also been suggested for solar given that this technology is increasingly accepted by host communities with relatively benign environmental effects.
As mentioned in our earlier comment piece on the UK green energy sector, we welcome the commitment to finalise updates to the National Policy Statements for Energy, in order to strengthen the weight to be given to energy security and net zero, by the end of 2023. However, it is disappointing that only limited reference is made to a general update of planning policy (in respect of offshore wind and solar), particularly as many policies within the National Planning Policy Framework (for England) have failed to keep pace with the evolution of emerging technologies (e.g. hydrogen).
While the BESS provides a clear picture on supply-side investment and priorities, it is relatively quiet on management of demand. Although flexibility is acknowledged, greater clarity on the Governments’ strategy for balancing supply from an increasingly renewable energy system is needed. Early deployment of technologies such as energy storage, electrolysers and interconnectors are essential to ensure there is sufficient flexibility available to manage supply.
Furthermore, back-up supply capacity will also remain an essential component of the system, seeking to fill the gap during periods of low renewable output. This is likely to include a mix of low-carbon solutions, including bioenergy and CCUS-enabled energy plants, alongside some natural gas generation. A concerted programme of policy and regulatory reform to unlock investment on a range of supporting technologies is therefore required, as without this there is a risk that the BESS will be create an unbalanced system with significant energy wastage, resulting in higher energy bills.
Attention must now turn to the detail of delivering a home-grown clean power, in a way which maintains supply-demand balance and keeps down costs to the consumer.
Disappointingly, there is no mention of onshore wind. Tomorrow, we will share our thoughts on why we believe this is a missed opportunity for the UK by the Government.
For more information on the BESS and the UK green energy sector please contact Thomas Lord or Mark Worcester.
28 April 2022