Speculation continues to mount over what will feature in the government’s crucial new Energy Security Strategy with Ministers at loggerheads over key parts of the plan – here’s the latest on what policies could make the cut
Could this be the week the much-trailed Energy Security Strategy is finally released? More than a month after Russia invaded Ukraine – sending already high oil and gas prices soaring and sparking calls for a full embargo on Russian fossil fuel exports – and weeks after Prime Minister Boris Johnson announced a new Energy Independence Strategy would be released, reports over the weekend suggested the plan was close to being finalised after repeated delays.
The Strategy has been the subject of intense debate within Cabinet with conflicting reports emerging again this weekend over what could be included and where Ministers stand on critical issues such as onshore wind development, fracking, and nuclear financing.
Here’s what we know so far:
When will it be released?
This weekend several newspapers reported the Strategy is likely to be released this week, with Thursday said to be pencilled in for the launch. But sources counselled that it could yet be delayed until after Easter.
The reports made clear the Cabinet was still divided on the issue of whether to relax planning rules for onshore wind farms, with Business Secretary Kwasi Kwarteng continuing to push for a substantial expansion in onshore wind capacity while some Cabinet colleagues continue to push back against a technology that they regard as an “eyesore”.
Meanwhile, the horrifying Russian atrocities coming to light in Ukraine are reigniting calls for more robust sanctions to be imposed on the Kremlin, including a full ban on energy exports to Europe. Lithuania yesterday became the first EU country to ban Russian gas imports, calling on other European countries to follow its lead. At the same time, the Kremlin has repeatedly hinted it could halt gas exports itself in retaliation at Western sanctions – a scenario that would send energy prices soaring still further.
The pressure on the UK government to ensure its plan is as ambitious as possible to tackle an escalating security threat looks set to wrestle with Conservative Cabinet Ministers’ desire to protect rural views and the Treasury’s commitment to minimising additional spending commitments. The hope is that the plan appears this week, but having already been delayed at least twice the timetable could easily slip further.
What do we know will be in it?
All the briefing suggests there will be two big winners in the new plan: offshore wind and nuclear power. These are the areas that are least contentious within Cabinet, even if there is still considerable uncertainty over the scale of the government’s ambition and how it plans to trigger an acceleration in development.
The Sunday Telegraph reported yesterday that the UK could get up to seven new nuclear power plants through the new Strategy, after Kwarteng told the paper “there is a world where we have six or seven sites in the UK”.
According to the paper, the Strategy is set to include plans for a new development vehicle, dubbed Great British Nuclear, while Boris Johnson is said to be preparing plans to “significantly expand the existing commitment to back one new large-scale nuclear power station by 2024”.
Previous reports had indicated that the Treasury had baulked at the potential cost of such a massive uptick in the UK’s nuclear development pipeline, but the Sunday Telegraph reported a meeting last week had helped bring the Chancellor onside. That said, while the Strategy is now expected to include an ambitious new target for UK nuclear capacity it remains unclear if there will be further details on how new projects would be financed and whether the government is planning to increase direct funding for both large scale projects and the proposed new generation of small modular reactors.
Similarly, offshore wind developers are expected to be big beneficiaries from the new Strategy, but it remains to be seen how the government’s support translates into fresh policy reforms.
Boris Johnson met with renewables industry leaders last week and was reportedly hugely effusive in his support for the offshore wind sector, hailing the potential to build a “colossal” floating offshore wind farm in the Irish Sea.
The Sunday Times reported that he asked executives “if we could come up with a vaccine in a year why can’t we do this in a year?” People at the meeting replied that they could, noting that it can take 24 hours to erect an offshore wind turbine and 10 years to get all the necessary planning and licensing permissions.
Reports suggest the new Strategy could include a target to more than quadruple offshore wind capacity to 50GW by 2030, up from 11GW. The likelihood is that such a target will have to be backed by proposals to streamline consenting and licensing processes.
What about fossil fuels?
The government is keen to position offshore wind and nuclear as the two ‘big bets’ in its new strategy, but the UK oil and gas industry looks set to emerge as another winner from the plans.
Ministers have made clear they want to see more investment in the North Sea basin and are planning new licensing rounds to enable further exploration.
The big question from oil and gas companies and environmental campaigners is whether the new Strategy will provide further clarity on how expanded oil and gas production will be made compatible with the UK’s net zero goals.
The government has promised that new projects will be subject to a net zero compatibility test, but there is widespread concerns in environmental circles as to how credible such tests will be. Meanwhile, oil and gas developers are reluctant to invest even at sky high oil and gas prices – witness Shell’s back and forth on the controversial new Cambo projects – without some assurances demand for fossil fuels will persist as the UK decarbonises.
Consequently, the government’s plans to develop a series of zero carbon industrial hubs that feature carbon capture and storage and hydrogen technologies might look one step removed from the Energy Security Strategy, but they are in fact critical to whether or not the government can simultaneously pursue increased domestic gas production and a net zero transition. There have been no reports thus far as to whether or not the new Energy Security Strategy will include long-awaited clarification on how the government plans to push ambitious CCS projects to a financial close and ramp up hydrogen investment, much to the concern of oil and gas developers and energy intensive industries that are already struggling with soaring energy costs.
Will the boost for oil and gas extend to fracking?
Yes and no. Cuadrilla was last week granted a year-long reprieve to the recent order instructing it to plug its test wells in Lancashire, and the Sunday Telegraph reported yesterday that Kwarteng is poised to write to the British Geological Survey to request a three-month review of the evidence relating to fracking.
A source told the paper the review would explore “safety and whether any new technology exists to help us accurately predict and manage seismic events” and thus allow for the review to be mentioned in the Energy Security Strategy.
Such a move would allow pro-fracking advocates to declare a partial victory, but those in government who are sceptical about the case for drilling further fracking wells are understood to be relaxed about the review, predicting that it is highly unlikely to lead to a reversal on the current moratorium on fracking projects.
BEIS Ministers have been clear that the ban should only be lifted if there is new evidence projects can be pursued safely in areas with relatively high population density and there is scant evidence that tremors can be kept below a level the government deems acceptable. Moreover, an election is just two years away and fracking remains hugely unpopular, especially in marginal seats. Insiders expect the Strategy to trigger lots of headlines about fracking, but little meaningful shift in policy.
Will onshore wind receive a boost or not?
Arguably the biggest uncertainty surrounding the Strategy is what will happen with onshore wind development.
On Saturday, several papers reported that BEIS was drafting plans to treble onshore wind capacity to 45GW by 2035, implying that a significant relaxation of planning rules that effectively ban development in England was on the cards. Just over 24 hours later, Transport Secretary Grant Shapps was telling broadcasters “I don’t favour a vast increase in onshore wind farms, for pretty obvious reasons. They sit on the hills and can create something of an eyesore for communities as well as problems of noise.”
The Cabinet clearly remains split on the issue with a final decision from the Prime Minister not expected until the last minute. Johnson himself hinted strongly last week that he thought offshore wind should be prioritised, but sources were then quick to clarify that reforms to encourage more onshore wind development were still in the mix.
Some reports have indicated that the government may look to square the circle, by relaxing planning rules a little, but ensuring local communities still have a considerable say in whether to approve new projects. There is also a talk of formalising currently voluntary schemes that aim to give financial incentives to communities that host new wind turbines.
However, for many observers the eventual approach to onshore wind will be a key test for the strategy’s credibility. Onshore wind farms are the lowest cost form of new generation and, unlike new nuclear plants and offshore wind farms, could be built very quickly at a time when the Kremlin is threatening to throw the European energy market into chaos.
Responding to this weekend’s conflicting reports, Shadow Climate Secretary Ed Miliband said: “Families across the country are paying more on their energy bills because of the government’s moratorium on onshore wind, the cheapest power available. Now the government seems to be backing off rumoured plans to scrap the ban, all because of pressure from the same Tory backbenchers who got it imposed in the first place. Britain deserves better than the Conservatives, who are incapable of acting in the public interest.”
What about solar power?
The briefing battle has focused on onshore wind farms, but much the same dynamics are at play for solar farms. Some Tory MPs have campaigned against new projects, citing concerns over impacts on landscapes and food security. But as with onshore wind farms, new solar projects are increasingly competitive and could be built very quickly if planning regulations were relaxed.
Reports have indicated BEIS wants to more than treble UK solar capacity with a new target to deliver 50GW of capacity by 2030, but again it remains to be seen how it intends to trigger such a rapid expansion of the market.
What else could be included?
One issue has been notable by its almost complete absence from the debate: energy demand.
It is an absolutely glaring omission. If part of the brief for the Energy Security Strategy is to help slash energy imports from Russia this year and guard against the very real risk of a worsening global supply crunch, then onshore renewables and measures to curb energy demand are the only things that can help curb imports in timeframes that run to weeks and months, rather than years and decades. As such, it is notable that all the areas that are expected to be at the heart of the Strategy – offshore wind, nuclear, and North Sea oil and gas – all take the best part of a decade or more to deliver any increase in domestic capacity.
The big unknown currently is whether the Strategy will also include measures that can make a meaningful impact on imports over the next 12 to 24 months. Will it increase funding for energy efficiency programmes? Will the government move to expand its new heat pump grant programme? Will the Strategy answer calls for expanded clean tech skills programmes? Will it have anything to say about oil demand and accelerating the switch to EVs? Will Ministers dare to include advice for businesses and households to reduce gas and oil demand?
BEIS is well aware of the importance of energy efficiency – the CCC and many others have made painfully clear how essential improving the efficiency of the UK’s building stock is to meeting net zero goals and Ministers have hinted of the need to curb energy demand in response to Putin’s aggression. The clean tech sector also secured a significant victory in a Spring Statement that otherwise ignored the net zero agenda, with VAT zero rated for domestic clean technologies and tax breaks pulled forward for businesses. But the Treasury has repeatedly resisted calls to do more to ramp up energy efficiency programmes and reports have indicated that one of the main reasons the Energy Security Strategy has been repeatedly delayed is that Chancellor Rishi Sunak does not want to sign off on any increased spending.
The marine energy, smart grid, and public transport sectors are facing similar uncertainty, with little steer from Whitehall as to whether or not they will feature in the new Strategy.
It looks as if the Energy Security Strategy will provide a significant long-term boost for key parts of the clean energy transition, but whether the new plans will be genuinely fit for purpose at a time when international energy markets have rarely looked more fragile remains to be seen. The hope is that some much-needed clarity will finally emerge this week.
