This is an extract from Clifford Chance’s recent briefing titled “Recent Government Announcements for the Energy Sector”.
After delays due to concerns within the Treasury, the Government released its highly anticipated British Energy Security Strategy on April 7, 2022.
Key highlights from the Strategy:
• Nuclear: There is a heavy focus on nuclear within the Strategy, with the Government setting a target of 24GW coming from nuclear by 2050 which would represent 25% of projected energy demand. This equates to up to 8 reactors, although small and advanced modular reactors are identified as options and plans to approve two new reactors at Sizewell have also been announced. Wylfa is also specifically identified as a confirmed project. In terms of funding and planning these nuclear projects, the Strategy signals that a new body (the Great British Nuclear body (“GBN”)) will be established with “substantial funding” to bring forward these projects (in addition to the £1.8 billion already promised in the Autumn budget). There is also to be a £120 million future nuclear enabling fund available.
• Offshore wind: Offshore wind is also one of the key cornerstones of the Strategy with the Government signalling its intention to increase capacity up to 50GW by 2030 (with 5GW allocated in deeper sea areas). In order to facilitate this increase, planning reforms are also promised to cut consenting time frames down from 4 years to 1 year and introduce other measures to reduce the time it takes for new projects to reach construction stages.
• Oil & Gas: Oil and gas still make an appearance with new licencing rounds announced for North Sea oil and gas in summer 2022 and the establishment of Gas and Oil New Project Regulatory Accelerators to facilitate the rapid deployment of projects. A geological survey on shale gas has been commissioned which could potentially result in the lifting of the current moratorium on fracking. While this appears at odds with the Prime Ministers promises around “clean power” and the climate change commitments, it is inevitably included as a way to try to improve Britain’s energy independence and security in the immediate short-term.
• Onshore wind: No targets are set on how much capacity the Government will seek to implement for onshore wind, which is arguably one of the easiest infrastructures to consent and build. All that is proposed in respect of onshore wind is that the Government plans to consult on partnerships with willing local communities who wish to host onshore wind infrastructure in return for lower energy bills.
• Solar: The current capacity of 14GW will be increased by five-fold by 2035 and the Government will consult on the planning rules that apply to ground based solar projects. Focus will also be on encouraging rooftop installation on commercial and domestic buildings.
• Hydrogen: Targets for low carbon hydrogen production capacity have been doubled to up to 10GW by 2030, with half coming from green hydrogen.
• Heat pump manufacturing: A Heat Pump Investment Competition worth £30 million will be run in 2022 to boost UK manufacturing of heat pumps in order to reduce reliance on gas.
The Strategy has already drawn criticism on the grounds that that it does very little to tackle eye-wateringly high energy bills in the immediate future, with Business Secretary Kwasi Kwarteng admitting it is “more of a medium three, four, five year answer”. The key issue with the Strategy is that it will take years (if not decades) for these big infrastructure projects to become operational and
have any impact on Britain’s energy security or consumers’ pockets (and in fact will only add to energy costs as taxpayers pay towards the cost of these nuclear projects).
Limited detail has been provided at this stage on the funding of any new nuclear projects which has always been a critical issue in the investment and construction of nuclear in Britain. The Strategy only outlines that GBN will be backed by “substantial funding” but there is no indication as to how much or how projects will be selected for investment. Also notably absent from the Strategy is any substantive measures to meaningfully reduce energy demand through energy efficiency or insulation measures (which would provide short term improvements) or the use of other emerging technologies such as tidal power. The Strategy also marks an about-turn on onshore wind which was previously heralded in the 2020 Energy White Paper as one of the “key building blocks of the future generation mix, along with offshore wind”.
More detail will be released on how the Government intends to implement the various policy objectives in the Strategy. While the boost to nuclear and offshore power is welcomed, the significant lead times of any benefit are glossed over and little is provided to immediately take steps to reduce UK reliance on overseas imports or improve the high energy costs now being incurred by UK households.
The complete briefing can be accessed here