Out-Law News 4 min. read
18 Dec 2020, 9:57 am
Plans for how the UK energy system will support the transition to a 'net zero' economy, shift from fossil fuels and decarbonise the power sector have been published by the government.
The proposals, set out in its long-awaited Energy White Paper, build on pre-announced commitments included in the recent 10-point 'green industrial revolution' plan. They include plans for a UK Emissions Trading Scheme (UK ETS), to replace the EU ETS from 1 January 2021; investment in offshore wind, green hydrogen, carbon capture, usage and storage (CCUS) and electric vehicles infrastructure; a review of the energy-related National Planning Statements (NPSs) and energy market regulation; and greater use of electricity and low carbon heating solutions in homes.
Additional support will be provided for the North Sea oil and gas industry and those in older, less energy efficient homes as part of the proposals, while the government will consult on a series of energy market reforms to keep bills fair and affordable. Up to 220,000 jobs could be created over the next 10 years to deliver the plans, according to the paper.
Energy and infrastructure law expert Gareth Phillips of Pinsent Masons, the law firm behind Out-Law, said: "The long-awaited Energy White Paper reiterates support for offshore wind and puts the development of that technology at the heart of the government's decarbonisation strategy towards 2050".
The paper may have been a long time coming but there is much in it that will support renewable energy proposals whilst a review of the energy-related National Planning Statements is undertaken.
"The paper acknowledges that decarbonising the power sector has led the UK's efforts to reduce greenhouse gas emissions, and recognises the growth in operational offshore wind from just over 1GW in 2010 to 10GW in 2019. It reiterates that clean electricity generation must increase fourfold to achieve the net zero target."
"The paper stops short of prescribing a particular generation mix for 2050, saying it would be inadvisable to do so, and instead leaves it to the electricity market to find the best solutions to very low emissions, reliable supply and low cost to consumers. Even so, it is acknowledged that 'a low-cost, net zero consistent system is likely to be composed predominantly of wind and solar'," he said.
"The paper may have been a long time coming but there is much in it that will support renewable energy proposals whilst the review of the energy-related NPS is undertaken. It also explicitly provides 'a strong signal to project developers and the wider investor community about the government's commitment to delivering clean electricity ... this should stimulate the continued deployment of low carbon technologies in the near term'," he said.
The paper is built around 13 commitments which, according to the government, will transform the UK's energy system from one historically based on fossil fuel use to one that is fit for a net zero economy. It is aiming to cut 230 million metric tonnes of emissions generated by industry, transport and buildings over the next decade while creating hundreds of thousands of green jobs and keeping bills affordable for consumers.
The government intends to have "overwhelmingly decarbonised" the UK power system by the 2030s through its plans to quadruple offshore wind generation capacity to 40GW by 2030; incentivise low carbon hydrogen production and invest £1 billion in CCS by 2030, to be delivered in four 'low carbon clusters' in traditionally industrial areas. New nuclear will also form part of the low carbon generation mix where there is "clear value for money for consumers and taxpayers".
The paper also contains a commitment to support oil and gas workers and the communities who will be most affected by the shift away from fossil fuels, targeting the "expertise" of those in these sectors for new jobs in developing CCS and hydrogen production.
Oil and gas expert Bob Ruddiman of Pinsent Masons said: "All eyes will now be on the Oil and Gas Authority's (OGA) Strategy and the eagerly anticipated oil and gas sector deal to see what this support and guidance will look like".
"The oil and gas industry has an important role to play in helping the UK achieve 'net zero' and the ambitions set out in the Energy White Paper, and has long been a source of innovation and technological development as it grapples with the complex energy challenge," he said.
The government's vision is "to establish itself as a world leader in terms of the deployment of clean hydrogen and CCUS in the UK", with "eye-catching ambitions" set out in both the paper and the previous 10-Point Plan, said environment and climate change expert Stacey Collins of Pinsent Masons.
"However, the detail of how the government will get the necessary projects from an aspiration to a reality is still awaited," he said.
It's inevitable that there will be a time lag between the big picture vision and the specifics of how to make deployment a reality - however, there are now many CCUS projects in development, and we need to keep the momentum going to get some of these projects into the 'build' phase as soon as possible.
"There is a welcome acknowledgement that the government needs to fund research and development into the practicalities and costs of using hydrogen as a heat source in homes and workspaces. The technical, and safety and other practical, challenges of switching from gas-based heating to hydrogen-based heating has too often been glossed over. It may be that we start to see boilers and other appliances, like ovens and fires, being sold as 'hydrogen ready' in the coming years. Clearly the results of this R&D will be a key factor in whether the government's ambition to have a hydrogen-fuelled town becomes a reality," he said.
"The government recognises that initial commercial-scale CCUS projects will have a substantial learning curve, which makes them a more risky investment. Therefore, it has committed to providing the market with a business model and revenue support mechanism to stimulate private investment in the early projects, in effect by materially de-risking them. The indication in the paper is that we won't have the details of this until at least 2022, which will be disappointing for many who hoped they would be available next year. As with any new technology, it's inevitable that there will be a time lag between the big picture vision and the specifics of how to make deployment a reality - however, there are now many CCUS projects in development, and we need to keep the momentum going to get some of these projects into the 'build' phase as soon as possible," he said.
Gareth Phillips said that achieving the government's ambitious offshore wind power targets would be contingent on planning reform, particularly around the development consent regime and reform of the environmental and habitat impact assessment process.
"The paper announces the creation of a new ministerial delivery group to oversee the expansion of renewable power in the UK, reduce consenting delays and ensure that planning guidelines and environmental regulations are fit for purpose," he said. "This should not be about reducing environmental protection, but rather the need to ensure an appropriate method of assessment and consistency in its application by offshore wind developers, nature conservation bodies, the Planning Inspectorate and the government when considering proposals."
18 Nov 2020
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