The UK government has published its much-awaited Energy Security Strategy. With a focus on securing a more resilient UK energy supply free from foreign dependence, and retain the UK’s net-zero ambitions, there was no surprise that the government confirmed its intention to construct eight new nuclear reactors and to make planning systems for offshore wind turbines easier. Both are likely to play a key part in Britain’s move towards energy independence as well as meet its carbon emission targets in the coming years. But the strategy evidently isn’t going to solve the immediate energy cost crisis emerging for UK domestic and business customers. Nuclear reactors don’t appear overnight – the strategy suggests two new reactors at Sizewell and development on the Isle of Anglesey to be overseen by a new body, Great British Nuclear, and the new target of 24GW from nuclear isn’t expected to be met till 2030. There is little early comfort, therefore, for UK business from the government’s energy plans which appear to be designed with medium to long term planning in mind.
What of the UK’s net zero commitments? The target, you may recall, is net zero by 2050 and interim target of 78% emission reduction by 2035. The energy strategy commits to 95% low carbon energy generation by 2030 and identifies nuclear, solar, wind and hydrogen as key. The strategy’s focus on medium to long term allows the government to bring in more contentious shorter-term development which uses fossil fuels. For example, there is a proposal for a new licensing round this year for North Sea oil and gas projects, although, the argument is that ‘local’ fossil fuels are lower carbon spend than imported. The government is vague on the detail around some of the renewable generation too, e.g. support for domestic and business generation of solar and on rules for inland wind turbines in ‘supportive communities’ who could benefit from cheaper energy in return. Fracking remains on the table with the government commissioning an updated review of the viability and safety of the method and will be controversial no matter what the outcome of the review.
Probably the most disappointing aspect to the strategy, however, is it focuses entirely on energy supply with little on demand. If the UK is to gain a truly resilient energy market, then this can be more readily achieved by reducing demand. Britain has an ageing housing stock – why no mention of insulation or retrofit? Many of our businesses are located in old and inefficient premises – incentivising upgrade to property could clearly benefit business by lowering energy costs as well as reducing the demand for energy and helping the push to net zero. Governments have had criticism of previous schemes, such as green deals, energy tariffs and green capping, and perhaps feel that this is an area that doesn’t excite voters, unlike big infrastructure projects. But the failure to consider the end consumer, including business, is one that will need to be addressed at some point if we are to achieve, not only a secure and resilient energy market for the UK, but one that matches our climate commitments.
The strategy, therefore, is a mixed bag with laudable intentions and longer-term aspirations for the UK that we will require to meet. Britain’s business community will play a critical role in achieving energy resilience, but we need to see more of the detail on how businesses will be encouraged to contribute particularly around managing demand and - for those involved in supply - how they will be supported in contributing to low carbon energy generation.
The government also confirmed around the same time, that it is setting up its new public body, the Future System Operator (FSO). In July 2021, Ofgem published a joint consultation with BEIS on proposals for an expert, impartial FSO with responsibilities across both the electricity and gas systems, to drive progress towards net zero while maintaining energy security and minimising costs for consumers. They couldn’t have known then that the focus on energy security would become as intense as it has as a consequence of the Russia-Ukraine conflict. The proposal is for all the current Electricity System Operator (ESO) and, where appropriate, National Grid Gas (NGG) roles and functions be carried out by the FSO. The new public body will undertake strategic network planning and long-term forecasting in gas, and work with energy suppliers and networks to provide stability to the UK’s electricity systems. The FSO will be launched once the necessary legislation is passed and timelines have been discussed with the key parties - including Ofgem, National Grid, the Electricity System Operator - involved in its implementation.
Resilience First will be discussing all these issues at our webinar on 27 April. Speakers from Control Risk, Inspired Energy and National Grid will be joined by our Chair, Lord Toby Harris. Full details and booking are available at: Energy Markets – Coping with volatility and the conflict in Ukraine | Resilience First