The government’s British Energy Security Strategy has been met with criticism from the energy sector, having been described as a “missed opportunity.”
It provides further support for new nuclear, offshore wind and heat pumps, but energy efficiency is conspicuously absent, while a new licensing round for north sea oil and gas is planned for the autumn.
The strategy has been produced in light of surging power prices and significant market volatility, in particular over the last month due to the Russian invasion of Ukraine. Gas shortages throughout 2021 have already squeezed businesses and consumers, with 27 suppliers collapsing (and Bulb entering special administration) last year.
In February, Chancellor Rishi Sunak unveiled three key measures to help support consumers, including a one-off repayable £200 loan, a £150 council tax rebate and a discretionary fund. But as the situation has continued to escalate since this point, Prime Minister Boris Johnson announced that a security strategy would be established to help protect consumers and businesses.
“We have seen record high gas prices around the world. We need to protect ourselves from price spikes in the future by accelerating our move towards cleaner, cheaper, home-grown energy,” business and energy secretary, Kwasi Kwarteng, said today as the British Energy Security Strategy was published.
“The simple truth is that the more cheap, clean power we generate within our borders, the less exposed we will be to eye watering fossil fuel prices set by global markets we can’t control.”
Reacting to the strategy however, many have said that it misses the mark, providing no short-term support for either businesses or consumers struggling with the high power prices.
“For businesses – who are struggling right now with short-term liquidity issues and high bills caused by the volatile wholesale market – today’s Energy Security Strategy feels like a missed opportunity,” said Anthony Ainsworth, COO at npower Business Solutions.
“For example, helping businesses reduce energy consumption through more innovative efficiency solutions is a real ‘no regrets’ action that could be taken. These can be implemented quickly and would result in immediate savings both in terms of their bottom line and decarbonisation efforts.
“Overall, unfortunately, today’s announcement does little to help businesses address the short-term issues they are facing right now.”
A new nuclear reactor every year
Key to the strategy is the acceleration of new nuclear power, with a new target of up to 24GW by 2050. This would allow the technology to meet around 25% of the country’s projected electricity demand, with the project pipeline to include Small Modular Reactors where technology readiness allows.
This would be equivalent to a new nuclear reactor a year for the next decade, supported by a new government body, Great British Nuclear. This will be backed by substantial funding, the government said in today’s strategy, including a £120 million Future Nuclear Enabling Fund which will be launched this month.
Work will focus on progressing a series of nuclear power projects as soon as possible, including the Wylfa site in Anglesey. The development of the site – which was set to include two Advanced Boiling Water Reactor nuclear units with a total capacity of 2.9GW – was dropped by Hitachi in 2020 due to a changed investment environment created by the COVID-19 pandemic.
The nuclear energy sector has welcomed the new support and focus on the technology, with EDF’s UK CEO Simone Rossi saying: “Building more new nuclear will reduce Britain’s dependence on overseas gas and keep energy prices stable, creating thousands of jobs while we’re doing it.
“The fastest way to get more nuclear in Britain is get on with the next two units at Sizewell C. It’s a copy of Hinkley Point C, the design is approved and ready to go, and British manufacturers are experts in how to build it. Building more of the same design is the best way to bring down costs and develop a strong UK supply chain.”
However, given the pressing energy security challenge and the approval and construction times associated with nuclear power, many have criticised the emphasis on the technology.
For example, Eduardo Monteiro co-CIO of Victory Hill Capital Advisors LLP said: “The government’s focus on nuclear is hugely problematic. The strategy reaffirms a broader assumption that nuclear is not harmful. While nuclear does not emit CO2 at 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.”
Onshore wind again snubbed by government
The British Energy Security Strategy sets out a new ambition of up to 50GW of offshore wind by 2030. This includes a target of 5GW of floating offshore wind, up from 1GW initially stated in Johnson’s Ten Point Plan in 2020.
To support this, new planning reforms will cut the approval times for offshore wind farms from four years to one year. Additionally, the process will be streamlined to “radically reduce” the time it takes for projects to reach construction.
However, many in the sector have been left disappointed by the comparatively little support for onshore wind. The strategy says that the government will consult on developing partnerships with a “limited number of supportive communities” that want to host new onshore wind farms in returns for lower energy bills.
“It’s clear that renewable energy is the way to address the climate crisis, skyrocketing energy costs and issues around energy security. And the people of the UK know that too with overwhelming support for the expansion of renewables, including onshore wind, voiced in poll after poll after poll,” said campaigner for charity Possible Alethea Warrington.
“But today’s announcement reveals that the government simply refuses to recognise the role that onshore wind has in scaling up renewables. By dragging its feet on onshore wind, the government is failing people across the UK that are facing a worrying future of cold homes on a warming planet. Instead, we should be making the most of our abundant, clean wind resources.”
Reports in recent weeks have highlighted a split in support for onshore wind within the Conservative Party, with transport secretary Grant Shapps for example labelling it an “eyesore” in an interview with Sky.
An independent survey carried out by Opinion Matters and commissioned by Octopus Energy Generation this month, however, found that nine in ten (87%) people support having a wind turbine in their postcode area if it will reduce their energy bills.
Solar, hydrogen and heat pumps
Solar power is acknowledged in the security strategy, with the government set to look to increase the UK’s solar capacity. Currently, this sits at 14GW according to BEIS, and could grow up to five times by 2035, particularly on domestic and commercial rooftops.
The government is set to consult on the rules for solar projects to help facilitate this, although at the time of writing, which rules will be consulted on and when remains unclear.
It said that the strategy will support 10,000 solar power jobs by 2028, which is almost double the government’s previous expectations.
Dr Alice Bell from Possible however noted that this is less than the number of jobs lost under the Conservatives in a single year in 2016 following the closure of the feed-in tariff.
“The promise of 10,000 solar jobs in six years is hard to stomach when it was only six years ago that the Solar Trade Association [now re-named Solar Energy UK] were lamenting the 12,500 jobs that the Cameron government slashed in just a year,” she said.
“Cameron and Osborne managed to slash twelve thousand solar jobs in a year, now Johnson and Sunak are saying they’ll make ten thousand in six? It’s hardly the visionary energy policy we’re looking for from the Prime Minister.”
The strategy also announces a doubling of Britain’s hydrogen ambition, with up to 10GW of low carbon hydrogen production capacity now being targeted by 2030. This will include at least half coming from green hydrogen, making use of excess offshore wind power which would otherwise be curtailed.
One aspect broadly welcomed by the energy sector is further support for heat pumps, with a Heat Pump Investment Accelerator Competition planned for 2022. This will be worth up to £30 million, and help Britain reduce its demand for gas.
Laura Bishop, chair of the Ground Source Heat Pump Association (GSHPA) welcomed the announcement of the new grant, but added: “ . . .again, this will do little in the short-term to boost heat pump demand, or put the UK on course to delivering the Prime Minister’s target of 600,000 heat pumps per year by 2028.
“The GSHPA has been calling for an acceleration of the welcome measures contained in last year’s Heat and Buildings Strategy, but today’s announcements provide no additional funding for consumers wanting to switch to heat pumps, nor give any clear indication of when the legacy environmental costs on electricity bills will be removed.
“We needed to see far greater urgency in today’s announcements, with a clear focus on reducing energy demand in the short-term. We didn’t get it.”