The last few weeks has seen the Johnson government focused on Brexit negotiations given the end of the EU exit transition period at the end of December 2020.
However, the government has also managed to make several major policy announcements that will shape its political and policy direction until the end of this Parliament. Attention is turning to big policy issues, such as new energy infrastructure and achieving the UK’s legal net zero 2050 target.
This week the government set out its future direction of travel on energy policy in its long-delayed Energy White Paper (EWP). It follows recent major announcements setting out a UK National Infrastructure Strategy, the Committee on Climate Change’s Sixth Carbon Budget and the Prime Minister’s 10-point Plan. There is some indication of renewed political focus at the highest level with the creation of a cross-government Ministerial Delivery Group to focus on delivering renewable energy and addressing barriers.
Given that demand for electricity is predicted to double by 2050 mainly due to low carbon heat and transport, the EWP makes clear that energy will play a vital role in the UK’s economic recovery and spark a green industrial revolution. The EWP hopes that 220,000 jobs will be created by 2030.
The EWP may not be the detailed plan that energy geeks, international investors or climate change campaigners would like. Questions remain on how the gap will be closed between the emissions reduction targets to achieved by 2050 vs what’s in the EWP. However, it is an encouraging signal of a change of pace and commitment to deepen the impact of renewables in the energy system.
Public affairs leads can help their organisations to define the offer it can make to national/local government in four areas:
1. Leveraging private capital and maximising public investment.
2. Delivering infrastructure in communities and winning local support.
3. Impacting consumer behaviour and changing behaviour.
4. Informing decision makers on how to create optimal regulation for a green future.
The new policy aims to build on progress to date from decarbonising the power sector and to meet the levels of future projected demand for power by consumers. As such there will be a new round of competitive auctions to secure investment and delivery of a higher volume of renewable energy technologies (an extra 12GW). These technologies are offshore wind, onshore wind, solar, hydrogen, floating offshore wind and tidal. The competitive auction won’t take place until late 2021.
In addition, the EWP reaffirms the commitment to delivery an increase in offshore wind by 2030 (from 30GW to 40GW). An exciting development is that this will include 1GW of floating offshore wind in addition to more thinking on exploiting marine energy, including wave and tidal energy.
Also, the government is aiming to kickstart the scale up of hydrogen, setting out a 5GW commitment to hydrogen by 2030. The hope is that hydrogen will play a valuable role in helping meet consumer energy demand and in balancing the energy system when power demand is at a peak. A new Hydrogen Fund will be established, with £240million focused on producing hydrogen and also the government hopes to see a pilot of a town heated by hydrogen by 2030.
There remains a desire for a new nuclear renaissance in the UK. The government intends to reach a final investment decision on one major nuclear plant by the end of the current Parliament. Discussions have started again with EdF on building a new nuclear plant (Sizewell C) which could provide 7% of the UK’s energy needs. As the financing of new nuclear is a serious political issue, with big questions on value for money given the potential for astronomical cost overruns, the government make clear value for money needs to be proven.
Also, further thinking will take place on a new financing model for new nuclear and also the role of public investment in stimulating future nuclear construction. But, this model (regulated asset base) could end up seeing consumers be responsible for the costs of nuclear construction though the aim is to leverage more capital and reduce costs to consumers over the lifetime of an asset.
In addition, the EWP sets out the desire to stimulate a market in modern small nuclear reactors (SMRs) with £385 million funding to help develop this. Finally, the government wants to see the delivery of a nuclear fusion plant by 2040.
Unlocking the potential of young or emerging technologies is another focal point for future UK energy policy. It may also provide opportunities for international innovators and companies to positively shape UK energy policy and delivery in coming years.
A Net Zero Fund, worth £1billion will include a focus on developing technology that can store energy for longer. Also, as energy demand and generation becomes more local, there is a need for smarter energy systems and greater innovation between national and local energy networks. This will reduce consumer bills and ensure the effective operation of the energy grid.
The EWP reaffirms an existing commitment of funding £1.3 billion to rollout more electric vehicle charging infrastructure, including rapid charging on England’s motorways and major roads.
By Spring 2021, we will also hopefully see a new strategy on how data and digital can be used to transform the energy system, and more on using data across sectors to better understand energy use. Finally, there will be a new competition on how to modernise access to energy data (£2 million).
Ensuring low carbon heat is essential if the UK net zero target is going to be met. The EWP reiterates a commitment to increase the number of electric heat pumps from 30,000 to 600,000 a year by 2028. There will also be more thinking on whether new homes should be banned from connecting to the existing gas network and cleaner energy sources for heat are encouraged instead. Finally, in 2021 the government will look to set up a new grant to help people opt for heat pumps instead of using fossil fuel alternatives.
There are other announcements on protecting energy consumers, changing the way the energy system is governed and a new UK emissions trading regime for life after Brexit.
There will be many more announcements in 2021. This includes on a net zero strategy, transport decarbonisation, hydrogen, heat and buildings, industrial decarbonisation (including carbon, capture & storage) smart energy systems, competition of energy networks, green jobs and the COP26 climate change summit that the UK is hosting.
If you would like to discuss how policy may develop or any public affairs challenges in light of recent announcements, please get in touch for an exploratory conversation.
Public Affairs Experts - December 18th, 2020