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Long-term solutions to near-term problems: The energy sector reacts to ‘disappointing’ security strategy

The British Energy Security Strategy was released on 7 April. Image: Getty.

The British Energy Security Strategy was released on 7 April. Image: Getty.

Yesterday’s British Energy Security Strategy has been met with disappointment from many in the energy sector, who have branded it a ‘missed opportunity'.

While increased renewable energy targets were welcomed, as well as the key focus on nuclear sending positive signs around the long-term importance of electrification, the lack of focus on short-term support or demand side response have been met by criticism.

“Ultimately, this strategy could be construed as one that delivers qualified long-term solutions to near-term and unequivocal problems. While it is clear that moves towards low-carbon energy sources and a focus on net zero should be paramount, that was the case before war in Ukraine," ,” said Gareth Miller, CEO at Cornwall Insight.

"Many of the levers the strategy looks to pull are the same as previous policy documents, just with a different ambition and timetable, and - like previous policy documents - almost all having an effect well into the 2030s.

"Many had expected something new that would bring forward less energy dependence on imported fossil fuels, as well as address the cost arising in the market for bill payers today. By announcing a strategy that doesn’t really deliver against these outcomes, which indulges in future-gazing, and which shuts out some fairly obvious levers that could make a positive impact, the danger is that in the coming cost of living and possible energy supply squeeze people will lose confidence in the adequacy of government policy to deliver secure and low carbon energy in an affordable way.

“We thought before the strategy that come winter more may have to be done by government on this agenda. We still think that’s the case," Miller said.

This view that while there are positive elements in its long-term focus, but limited support in the short-term is broadly supported by the sector.

CCC director of analysis, Mike Thompson for example, said: “Recognising the difficulties in implementing effective policy quickly, it is still disappointing not to see more on energy efficiency and on supporting households to make changes that can cut their energy bills now. Government has reiterated its commitment to do more and we look forward to seeing details in the coming months.”

Scaling up renewables

The commitment to increase the target for offshore wind to 50GW by 2030 and to look to increase solar power fivefold by 2035 have been particular highlights in the security strategy.

“The Prime Minister's ambitious new strategy puts the rocket boosters under the UK's transition to renewable energy and will cut consumer bills,” said RenewableUK’s chief executive Dan McGrail.

“The new targets mean that our world-leading offshore wind industry will do the heavy lifting in getting Britain permanently off the hook of gas power by boosting our nation's home-grown energy supply. Reforms to speed up the planning system and how quickly we connect new offshore wind are essential to meet these new ambitions.

“We need to make use of every tool in the box to boost our energy independence, so it's right that government is looking again at planning rules so that onshore wind can proceed in parts of England where there is support, as it's the cheapest source of new power and the quickest to build.”

But the lack of support for onshore wind in the strategy was a disappointment to many, and it follows opposition from within the Conservative party to the technology.

Alethea Warrington campaigner for charity Possible said: “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.

"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."

With growth of renewables over the next decade, the demand for flexibility and in particular energy storage is set to expand dramatically. While storage wasn’t a focus of the security strategy, the push for increases in renewables has been welcomed by the sector.

"It’s great to see the government commit to prioritising cleaner, more affordable sources of energy, but it’s so important they understand the big-picture requirements to make that a reality. Wind power features heavily in this strategy, which is undoubtedly a good thing, but we mustn’t forget that it's intermittent so other things need to come alongside it,” said Amit Gudka, CEO and founder of Field.

"The reality is, to build a truly reliable, flexible and green grid we need to massively invest in battery storage to complement those generation solutions that have been the focus of conversations so far.”

Ambitious nuclear acceleration

One of the technology that particularly won out in the British Energy Security Strategy was nuclear, with plans for the rollout of eight reactors this decade announced.

This however, has not come out of the blue according to Cornwall Insight’s Miller.

“The government’s shift in focus towards more ambitious nuclear plans were well trailed. Many in the energy industry have long called for a greater commitment to nuclear power. However, the scale and speed assumed for negotiating terms, raising finance – taking three projects to final investment decision in this Parliament and the next – are very ambitious, and it is notable that they remain qualified by reference to value for money,” he said.

“The acceleration plans for build out of nuclear are also very ambitious. Given history, there is scepticism that projects just won’t be delivered to time and budget. The new financing mechanism, the Regulated Asset Base model RAB, sees those risks shared with consumers. This important change should be analysed and transparently debated so consumers get a better sense of the possible range of bill impacts.”

There is currently just one new nuclear power plant being built in the UK, EDF’s Hinkley Point C. It has been subject to repeated delays and cost increases, and is now expected to come online in 2026 and cost in the range of £22 billion to £23 billion.

“The UK has long needed to commit to 16GW of installed nuclear baseload generation to ensure that we can sufficiently electrify transport, heating and other power demands, so the announcement to commit to 24GW is welcomed,” said Chris Lewis, EY energy partner, specialising in nuclear.

“The recent closure of two operational nuclear reactors has brought into sharp focus the need to replace these. Nuclear remains the power source that emits the lowest carbon emissions and is a key component of the UK’s energy mix – now and in the future.

“Accelerating Sizewell C is good for energy security and sustainability. There is a long track record in nuclear that demonstrates building the same type of power plant, in the same way, is the most economic source of power. Sizewell C is a direct replica of Hinkley Point C and the UK government should ensure that the funding is available to accelerate this project delivery. The new government body, Great British Nuclear, must immediately provide accelerator funding to bring forward new projects.”

Short-term struggles

While there are positives for the long-term generation, the strategy provided little support in the short-term, with demand side measures being conspicuously absent.

“This energy strategy appears to be a recipe for failure. The choices the government appears to have made will see consumers pay more, leave the UK less secure, and expose us all to a greater risk from climate change, than if different choices had been made,” said Luke Murphy, IPPR associate director for energy and climate.

“This plan should have been a route map for the UK to make significant progress towards a more affordable, secure and clean energy future, but from what we’ve seen so far, it falls short on every test.”

The price cap jumped 54% at the beginning of April in response to surging gas prices, and the market has only grown increasingly volatile from when that was initially announced in February. In part this is due to the Russian invasion of Ukraine and the impact this has had on the wholesale gas and power markets throughout Europe.

As such, bills are again expected to jump significantly come the next price cap period, further straining consumer finances.

Sepi Golzari-Munro, deputy director at ECIU, said: “Soaring gas prices are responsible for adding at least £500 to energy bills, forcing another 2.5 million households into fuel poverty. Without help to insulate their homes to bring down gas bills there may be little prospect they can afford to keep their homes warm.

"Rumours that Chancellor Rishi Sunak blocked moves to boost the successful ECO energy efficiency scheme that’s saved low income households £1.2 billion on their energy bills this year, could raise tough questions as the gas price crisis continues to bite.

“It’s all the more striking, since insulation is the public’s top priority in the current gas crisis with 84% backing it as the best way to cut our reliance on gas and cut bills. With any extra UK gas production having no effect on prices, it begs the question whether having gas that households can’t afford to use counts as ‘energy security’ to them."

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