For as long as we depend on oil and gas – wherever it is from – we are all vulnerable to Putin’s malign influence on global markets.”  – Rt Hon Kwasi Kwarteng, Secretary of State

Renewables are the energy of freedom.”  – Christian Lindner, German Finance Minister

 

In response to the shocking Russian invasion of Ukraine, we are expecting the Prime Minister to say more next week about the UK’s energy strategy to free ourselves from Putin’s ‘malign influence’. Kwasi Kwarteng, among others, has debunked the idea we can drill our way to energy independence. Fantasies of fracking the UK countryside play into Putin’s hands by distracting from real solutions (we looked in detail at the arguments back in 2018). So here are seven things we think the Prime Minister should announce, building on the UK’s ambitious Net Zero Strategy but with the much greater urgency the crisis has shown is required.

 

1) Implement an urgent home upgrade plan to bring all our homes up to EPC Band C

Upgrading our homes would cut the UK’s gas demand by 7.5% . Households upgrading from EPC band D to band C would save 20% on their heating bills

The amount of energy we waste is the greatest failure of UK energy policy. The UK has Europe’s least efficient homes. David Cameron’s 2013 ‘cut the green crap’ policy to reduce spending on insulation led to a reduction of over 90% in the amount of homes being insulated, adding around £0.5 billion a year to our household energy bills. As gas prices soar, that extra bill will head towards £1billion.

 

2) Use the Contracts for Difference scheme to accelerate a diversified portfolio of renewable energy technologies and geography (and end the ban on onshore wind)

The UK’s growing fleet of renewables is already cutting electricity bills and could do so much more. Projects that have Contracts for Difference (CfDs) paid back £133 million to bill payers in the last three months of 2021, leading to a reduction in the price cap of £22.

Gas still provides around 35% of UK’s electricity. Regen’s analysis shows we have a pipeline of renewable projects we could deploy rapidly to cut that gas demand. When we looked a few months ago, there was 10 GW of onshore wind and solar with planning permission, a further 9 GW in the planning system, and another 20 GW in the wider pipeline of projects that have secured a grid connection. The government’s recent commitment to annual CfDs is a welcome initiative, but Regen wrote to Kwasi Kwarteng back in November calling for the target capacity for the current CfD round to be upgraded from 5 GW to 10 GW. We also need to end the effective ban on onshore wind and back a diversified wind portfolio as we set out in our recent blog, ‘Go West!’.

 

3) Develop low carbon fuels including green hydrogen from electrolysis and biomethane

Low carbon gas can directly replace fossil gas in high value applications such as industrial processes.

The government has a Hydrogen Strategy with a target of 5 GW of low carbon hydrogen production capacity by 2030. This leaves the door open to both ‘blue’ hydrogen produced from fossil gas by using carbon capture and storage. However, blue hydrogen will increase rather than reduce our dependence on fossil gas. The focus should now be wholly on the rapid development of green hydrogen.

 

4) Reform markets to back energy storage and flexibility – both short and long duration

The government’s Smart Systems and Flexibility Strategy estimates that a smarter electricity system will reduce the costs of our electricity system by up to £10 billion a year by 2050.

The development of battery storage systems on the UK grid has been a success story of recent years. We are now past the 1 GW mark  and there is very large pipeline of projects as Regen explored in a recent podcast. However, we need to move faster on a smarter system enabling consumers at all scales to engage with the energy system and be rewarded for shifting their demand. Perhaps, most importantly we need energy markets to recognise the value of long term storage in the UK energy system.

 

5) Far greater interconnection and integration between energy markets – so we can sell excess renewables to Europe and import energy from a variety of sources

The total capacity of interconnectors is currently around 8 GW rising to over 10 GW as new connections are commissioned. Analysis from BEIS and Ofgem suggests that increasing our interconnector capacity to 18 GW would save around £1 billion/year in system costs (2012 prices) in a fully decarbonised energy system.

The UK’s newest interconnector, the North Sea link to Norway, came online in 2021 enabling UK to benefit from Norway’s fast responding hydropower, and in return, to send them our excess wind power. Interconnection provides a route to market for UK exports of our renewable power and a diverse supply of low carbon energy including hydro power from Norway and Iceland, nuclear and offshore wind from France, solar from southern Europe and North Africa, and wind from Ireland and Western Europe.

 

6) Speed up EV charging infrastructure

The government has a detailed plan for net zero transport that aims to tackle the £49.9 billon wider costs to society of our current system. Now we need more urgency to reduce our dependency on oil.

Consumers have shown they want to switch to electric cars and manufacturers are responding with new models, but a purely market-led approach to charging infrastructure will leave too many people behind. The government needs to work with local authorities to ensure easy access to EV charging for everyone.

 

7) Maximise the value of the UK’s limited gas production by increasing storage

Reducing our dependence on gas will take time (we used 811 TWh in 2020 of which 439 TWh were produced in the UK) but there are immediate steps the government can take to make us more resilient in the meantime.

Increasing our storage capacity is an obvious step and we can also stop gas flaring, reduce methane emissions and work with industrial gas users to help them become more energy efficient.

 

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