Last week the Government published its much anticipated Powering Up Britain strategy, along with several thousand pages of documentation. This followed a High Court case last year which found that policy to date was insufficiently detailed to deliver on the country’s statutory duty to achieve net zero carbon emissions by 2050. Despite the large volume of material released, most people have been under-whelmed: there is little that is new in any of this, and the sense of policy inertia continues.

“The greenest thing about this plan is the recycling of already announced ideas. George Osborne first announced a competition for Small Modular Reactors in 2015. Carbon capture funding was announced in the Chancellor’s Budget earlier this month,”
– Caroline Lucas MP, Green Party

I had an interesting conversation recently with someone at DESNZ (the new BEIS) who suggested that the Government is paralysed by a fear of market interventions leading to a need for further market interventions. This is a reasonable fear, but one which is borne from a desire to micro-manage specific outcomes. A similar effect was seen in the sale of Bulb where an obsession around not leading the market led to a sub-optimal outcome. Here, the Government is failing to act, and one reason might be a fear that action might result in the need for corrective action like a bizarre application of Newton’s First Law.

The Government needs to get over itself. Energy policy is going no-where and the result is expensive and increasingly unreliable energy as well as a high likelihood that climate targets will be missed (although they are legal targets, there is nothing to prevent Parliament from changing them by amending the law). A back-to-basics approach is needed, focusing on real, established technologies while enabling innovation for the future. A hallmark of current policy is an assumption that new, as yet unproven technologies such as hydrogen and carbon capture will not only emerge, but will be commercially viable and underpin the energy transition. There does not appear to be a Plan B.

In the meantime, costs continue to rise, and energy security continues to fall. By summer 2028 there will only be one nuclear power station running based on the current schedule of closures, and Hinkley Point C is not expected to open before September 2028, although further delays may emerge – neither Olkiluoto nor Flamanville has managed to open despite much longer construction times. The Government makes much of its intention to confirm Sizewell C during this Parliament, but then there would be at least a decade before it would be built, and that’s assuming everything goes well. There are plans for small modular reactors and advanced reactors in the 2030s, but there are as yet unproven and may not enter the market on schedule, or at all.

GB nuclear assets

The ambitious plans for renewable generation remain, but most of the new detail here is about enabling measures such as speeding up planning processes. Industry is concerned more by the long lead times grid for connections (which can be 5-7 years in some cases), the reduction in the AR5 administrative strike prices, and overall budget for the Contracts for Difference auctions. The Government is being accused of “brinkmanship” since the consensus is that costs are rising and therefore the subsidy pot should also increase. Costs were also rising last year when the price of AR4 came in lower than previous auctions, but I have long been concerned that these levels were unsustainable. Not only do actual accounting data show costs rising and not falling, but the large financial losses seen among turbine manufacturers has been a warning that all is not well in the economics of the wind industry.

In the area of reducing heat losses from homes, the one area where policy ambition would be most welcomed, the Government’s goals are woefully inadequate: just 300,000 homes are to be improved over the next 3 years, at a cost of £1 billion, achieving £300-£400 per year in saving for those households. An investment, if it goes to plan, that would take more than 8 years to pay back. There are more than 21 million households in the UK, so this target is plainly inadequate.

Another issue is with the way in which home improvements are measured. There is a growing recognition that the Energy Performance Certificate is unfit for purpose, yet the Government is pushing forward with plans to ban homes with low ratings from being rented (with similar rules for commercial buildings). This risks further damaging the rental sector and reducing the number of homes available. In many cases, building owners face a choice between an expensive retrofit which may not achieve the desired ratings, or demolition and re-building, although this of course releases large quantities of embodied emissions.

The first step is to reform the EPC, removing the subjectivity, and introducing actual measurements of heat losses (and ensuring that heating and dryness are considered together since damp homes require more energy for both heating and ventilation – as this comment on LinkedIn makes clear). Removing the penalties for electric heating would also help – the measure should calculate the heat required to maintain comfort levels in the home rather than the cost of heating which may in some cases be outside the homeowners control.

There is still a strong sense that the energy transition is something that is being done to people rather than with or for them, with all of the rules about banning methane boilers and the sale of new petrol or diesel cars. A public that is already struggling with high energy costs is not interested in having to replace cars that are still working fine, or entire heating systems, particularly when in most cases the alternatives are unsuitable, particularly in the case of heating: hydrogen in the home is still an untested theory, and absent excellent insulation, heat pumps fail to deliver required warmth in cold weather. The Government would do well to take note of the recent referendum in Berlin on accelerating climate goals which was defeated after failing to meet the necessary threshold – interestingly the voter turnout was low at just 36% suggesting lower interest in the issue than policymakers may expect. Certainly climate has been falling down the Ipsos MORI issues survey rankings since COP 26.

ipsos issues mar 23

Overall my impression is that these documents amount to little more than a tick-box exercise to satisfy the legal requirement to present a more detailed net zero strategy. But the same targets-expressed-as-limits failings exist here as in previous attempts (eg “up to” 24 GW nuclear by 2050 instead of “at least”, the former being a limit rather than a target).

“This should be the moment to seize the economic opportunities of the global green race but instead the government’s dithering risks the UK becoming the ‘sick and dirty’ man of Europe once again. To compete with our international counterparts, we need a step change filling the close to £30 billion annual gap in investment needed to reach net zero and restore nature, and committing to a modern industrial strategy. That means investing in clean homes, transport, and industry. There appear to be some welcome though minor measures, consultations and reannouncements announced today, but the government must urgently bring forward its plans now postponed till later in the year. The UK needs to change course urgently, before it’s too late,”
– Luke Murphy, associate director and head of climate, nature, and energy at the Institute for Public Policy Research

Nothing here changes my view that net zero by 2050 is unlikely and that we’re facing a serious electricity crunch as this decade progresses. Climate activists saw last year’s court case as a victory, but in reality all it has done is divert officials’ attention away from useful work and into this huge justification exercise which is unlikely to bring us any closer to actually achieving the targets in question. But more to the point, energy security is at real risk as electrification drives demand at a time when coal and nuclear generation is closing. A twin focus on securing more non-intermittent generation and reducing heat losses in homes should be prioritised to address this risk.

Key elements of Powering Up Britain

Gas: focus on increasing security of supply

  • Allowing more gas from UKCS into grid without blending (lower energy value)
  • Increased use of biomethane to support de-carbonisation
  • Further updates later in the year on storage/flexibility

Nuclear: the creation of Great British Nuclear is confirmed, with a statutory role to be determined

  • At least one FID this Parliament (almost certainly Sizewell C) and two more in the next Parliament
  • Competition for SMRs to select the best design to launch as a priority
  • Advanced nuclear reactors targeted in the 2030s
  • Up to 24 GW of nuclear (25% demand) to be operational by 2050

Renewables: focus on enablers

  • Streamlining the planning and consenting processes for offshore wind
  • Nothing really new for onshore wind other than further consultations
  • Solar roadmap to be developed next year – up to 70 GW of solar (roof and ground mounted) by 2035
  • Consultation to simplify planning process for rooftop solar
  • Biomass strategy to be published by the end of June 2023
  • Up to 50 GW of offshore wind by 2030, including up to 5 GW of floating wind
  • Development of port infrastructure to support floating wind farms

Carbon capture and storage crawls on

  • Eight projects announced which will progress to negotiations to form the first two CCUS clusters, in the North East and North West,
  • Deployment of two industrial clusters by the mid-2020s and four by 2030
  • Deployment of at least one power CCUS plant by the mid-2020s
  • Target to capture 20-30 mtCO2 annually by 2030, including 6 mtCO2 pa from industrial CCS
  • Deployment of at least 5 mtCO2 pa of engineered greenhouse gas removals by 2030
  • Creation of 50,000 jobs relating to CCS by 2030

Hydrogen also progressing slowly

  • 15 projects being evaluated to share in the £240 net zero hydrogen fund with an aim of awarding contracts of 250 MW capacity
  • Two further rounds planned to launch late 2023 aiming to award contracts for 750 MW projects in 2025
  • Plan to deliver 1 GW hydrogen production by 2025 and up to 10 GW of low-carbon hydrogen production capacity by 2030 with at least half from electrolysers
  • Up to 1 GW CCS-enabled hydrogen production in operation or construction by 2025
  • Up to 1 GW of electrolytic production in operation or construction by 2025
  • A Hydrogen Certification Scheme to be established by 2025
  • Business models for hydrogen transport and storage to be designed by 2025

Flexibility and storage still on the back burner

  • Long duration policy framework to be developed by 2024
  • Working with Ofgem on demand side response and digitisation

Insulation targets are feeble

  • 300,000 homes to be insulated by March 2026 costing £1 billion and aiming to secure £300-400 pa savings for least energy efficient homes through improved insulation
  • Continued focus on heat pump rollout
  • Renaming the ECO as Great British Insulation

Transport: pressing ahead with zero emission vehicle mandates despite recent EU u-turn

  • More than £350 million investment in electric vehicle charging infrastructure
  • A final consultation has been published on the Zero Emission Vehicle mandate that would require an increasing percentage of manufacturers’ new car and van sales are zero emission from 2024
  • Consulting on a long-term trajectory for Sustainable Aviation Fuel uptake through a mandate to be introduced from 2025

Green finance strategy to secure investments in the energy transition

  • The Government wants the UK to be leader in green finance and attract £ billions of capital into green investments
  • Plans to explore new reporting requirements for companies around emissions and transition reporting
  • Currently consulting on regulating ESG ratings

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