The government’s ‘Energy Security Day’ brought in a grand total of almost 50 net zero and energy-related policy documents from government. This includes an ‘Energy Security Plan’ and ‘Net Zero Growth Plan’, which now provide the government’s blueprint for the future of energy in the UK.
We had hoped that this day would be used as an opportunity to ratchet up action towards a clean energy future for the UK. But these plans provide little in the way of new actions. They are largely a compendium of already-announced policies spread across multiple documents.
There are, however, at least some positive new commitments hidden amongst the bullet-points of re-packaged measures, along with several important new consultations that will shape key policy decisions in the coming years – below is Regen’s short summary of some of the most relevant areas for the clean energy sector.
Renewables
There are plenty of warm words but little in the way of action on renewables. The focus of new funding and policies is on CCS, nuclear, hydrogen, and doubling-down on new oil and gas production. An ‘energy security’ plan that overlooks low-cost homegrown renewables in favour of fossil fuels clearly misses the mark.
Of the positive news for renewables, there are two key points to note:
- applications are now open for the £160 million floating offshore wind (FLOW) manufacturing investment scheme to support FLOW scale up to 5 GW by 2030.
- commitment to establish a solar taskforce with industry and government and to “publish a solar roadmap setting out a clear step by step deployment trajectory to achieve 70GW of solar by 2035” (pg. 33 Net Zero Growth Plan) – to be published in 2024.
This is good news. But as Regen highlighted in our insight paper published earlier in March, the government is currently gambling with offshore wind projects over the investment support available under the CfD scheme following cost rises – putting deployment at risk.
Investment
- Publishing a series of net zero investment roadmaps throughout 2023
- New cross-cutting ‘Net Zero Business and Investment Group’ to address economic barriers
Following concerns expressed across industry over the past few months that the UK’s attractiveness for net zero investment is waning, it is positive that the government is “responding to feedback from investors on the need for government to provide clarity on how we are making new net zero technologies and sectors investable” (pg.15 of Net Zero Growth Plan).
However, the measures set out in today’s documents are unlikely in themselves to address this. As Regen wrote in our letter to the Treasury earlier this year, a clearer plan with tangible measures to avoid losing clean energy capital and technology developers overseas is urgently needed. Regen will be calling for government to adopt the five key investment priority measures we set out in response to the Spring Budget.
Infrastructure and planning
- Publishing an action plan to speed up connections this summer
- Examining evidence on distribution-level consenting to speed up the connections process
- Re-commitment to consult on Ofgem Strategy and Policy Statement
The commitment to “publish an action plan to accelerate connections” (Net Zero Growth Plan pg. 31) this summer is a welcome step given the 15-year delays that most developers now face – but the devil will be in the detail. The plan must be aligned with existing work being led by ESO as part of the ‘GB Connections Reform’ and ensure Ofgem takes sufficient responsibility for ensuring network infrastructure is net zero ready, including enabling strategic investment. The delayed Ofgem Strategy and Policy Statement is an important opportunity to do this.
- New consultation on community benefits for network infrastructure
The government also launched a consultation on community benefit for network infrastructure, a welcome step in recognising “that we need to bring communities with us in order to achieve net zero” (pg.12). Ensuring communities reap the benefits of clean energy projects is something Regen strongly supports. No specific model or approach is confirmed in the consultation, but it does leans towards voluntary direct payments for individuals living nearby and wider benefits for the host area. It is also proposed that the benefits be funded via electricity bills – but it is unclear how this ties in with proposals to shift levies from electricity to gas. As we set out in our recent paper on ‘Delivering local benefit from offshore renewables’, questions such as how to define the ‘community’, when to distribute benefits, who administers them, and where the funding comes from are all important areas for government to consider when designing the community benefit guidance to ensure it is done fairly and supports a just transition.
- Revised National Policy Statements (NPS) on energy infrastructure
On planning, the government has launched a consultation on revised NPS to speed up energy infrastructure projects, and they signal that further planning reform may be in the pipeline:
“given the scale and speed of low carbon infrastructure development needed, we expect that more planning reform will be required. We are looking closely at what other countries have done to speed up infrastructure deployment, including recent developments in Europe.” (pg.35 of Net Zero Growth Plan)
Heat and energy efficiency
- Extending the Boiler Upgrade Scheme to 2028 and launching rebranded ECO+ as ‘Great British Insulation Scheme’
- Commitment to outline a clear approach to gas vs. electricity ‘rebalancing’ by end of 2023/4
- New consultation on clean heat market mechanism design
- A strong signal that electrification is the key approach to decarbonising UK domestic heating
The Boiler Upgrade Scheme being extended to 2028 and the launch of the rebranded ECO+ supplier obligation as the ‘Great British Insulation Scheme’ (GBIS) are broadly positive moves. The government plans “to lay legislation by the summer” to take the GBIS forward. A minimum of 20% of support provided through the scheme is required to go towards low-income and vulnerable households, but Regen feels this should be higher, especially given that the energy crisis has laid bare the inequalities in our energy system and made already marginalised groups more vulnerable to rising prices.
Many other key decisions on energy efficiency and clean heat have been kicked down the road, such as tightening minimum energy efficiency standards for the private rented sector and phasing out new fossil fuel heating in off-gas grid properties.
However, the government does provide a positive and clear signal that electrification is the future of UK heating: “People’s homes will be heated by British electricity, not imported gas” (Powering Up Britain pg. 7).
A date has also been given for ‘rebalancing’ electricity and gas levies to “generate the clear short-term price signal necessary to shift both households and businesses to technologies like heat pumps” – this is an essential and long-awaited measure but must be done carefully to avoid creating perverse incentives. Regen’s 2020 paper provided analysis of how levies could be reconfigured to support fuel switching.
The new clean heat market mechanism consultation sets out the government’s preferred option for the design of a heat pump sales mandate, to be implemented by 2024. The obligation would apply to all manufacturers selling into the UK and is proposed to start at 4% of fossil fuel boiler sales, rising to 6% in year two. Hybrid systems will be included, receiving ‘0.5 heat pump credits’.
Other key areas
Electricity storage – finance for short and long-duration storage to be provided through the UK Infrastructure Bank (more information here). This is welcome, but must come with addressing the grid barriers that are preventing any new storage projects from being able to connect.
Transport – zero emissions vehicle mandate to be implemented in 2024. This is good news – it could have been watered down to include e-fuels like the EU version and the electric vans mandate is particularly ambitious compared to current market sales.
Local, communities and a just transition – Disappointingly, there is little focus on the crucial role of local and community stakeholders in the transition to net zero, nor the importance of ensuring a just transition that fairly distributes benefits and prioritises marginalised groups. Regen will be continuing to push for just transition thinking to be placed at the forefront of net zero policy – you can read more about our work and commitments here.