Parliamentary Insights: Steps forward and steps back for energy change

Geoff Davies of WWAM Writers Ltd., outlines major changes for oil and gas, alongside key issues for new nuclear.

In early October, the Department for Energy Security and Net Zero (DESNZ), the Treasury, the Welsh and Scottish Governments and the Northern Ireland Executive jointly announced detailed plans aimed at incentivising energy-intensive industries to reach lowest-ever levels of carbon emissions.

The 2024 calendar of the UK's Emissions Trading Scheme – published by the Intercontinental Exchange on behalf of the UK Emissions Trading Scheme Authority – will limit the number of carbon allowances for companies to buy in 2024 to 69 million. This is 12.4 per cent fewer than in 2023, and their lowest-ever level. The intention is that by 2027, the number will fall to around 44 million – a 45 per cent reduction compared with 2023 – before reaching around 24 million by 2030.

The joint announcement noted that, through the Scheme's auction process, companies in industries including manufacturing, power and aviation were required to buy allowances for every unit of carbon they emitted, these sectors would need to take further steps to cut their emissions because there would be fewer available to buy.

The previous month, the Energy Department announced ￡46 million of funding shared between 26 businesses carrying out projects aimed at cleaning up industrial processes while also reducing business energy costs. The innovative Belfast-based green fuel producer Catagen was awarded a ￡6 million share of the total. Recipients of the funding were the 'winners' of three government competitions: the Red Diesel Replacement Competition, the Industrial Hydrogen Accelerator Competition, and the Industrial Energy Transformation Fund.

Energy Security Secretary, Claire Coutinho, issued two sets of Ministerial Directions under section 52 of the Climate Change Act 2008, 'pursuant-to' articles 50(4) and 60(6) of the Greenhouse Gas Emissions Trading Scheme Order 2020.

The relevant regulatory body in each UK nation is responsible for the regulation of the UK Emissions Trading Scheme (UK ETS), including the issuing of civil penalties for non-compliance with greenhouse gas emissions permits.

In England, the regulatory bodies are the Environment Agency and the Offshore Petroleum Regulator for Environment and Decommissioning (represented by the Energy Security Secretary). The Directions were described as aiming to ensure consistency of approach and were defined as being 'pursuant to' penalties issued to installation operators for operating without a permit, and to ultra-small emitters that failed to notify their emissions had exceeded the maximum permitted amount. Other Governments of the UK issued similar directions to their respective regulators.

The controversial U-turns announced in September by Prime Minister, Rishi Sunak, on pledges previously made for Net Zero targets prompted critical reactions from businesses wanting certainty and consistency for decision making.

The widely reported key changes were:

1. the ban on sales of new petrol and diesel cars was being moved from 2030 to 2035;

2. the 2035 phase-out target for new gas boilers was being relaxed;

3. the ban on new oil boilers was being moved from 2026 to 2035;

4. an exemption on boilers was being introduced for vulnerable households; and

5. energy efficiency targets for landlords were being changed.

Mr Sunak gave as his justification for reining back on environmental commitments the fact that the UK was already well ahead of other countries. He also voiced the opinion that forcing people to change costly heat pumps would destroy support for further measures to tackle climate change.

New research by the gas members of the Energy Networks Association (ENA) together with Hydrogen UK had previously triggered calls from industry for more certainty from government on the UK's hydrogen plans if the country was going to grasp the economic opportunity which industry leaders said they represented. The researchers had found the UK had fallen six places in two years, from second to eighth position in an index that assessed how ready major economies were to use hydrogen effectively to help decarbonise their energy systems. During that time, no UK projects had progressed to the 'final investment decision' stage.

Meanwhile the USA, Germany, Japan, Canada, the Netherlands, and France had all leap-frogged the UK at a time when competition to attract international investment in energy infrastructure had increased dramatically.

UK industry and government therefore needed to:

1. move faster and be more flexible with production support;

2. identify and support strategic infrastructure investment now;

3. give clarity on the minimum roles for hydrogen in industry, power, transport and heat, with support measures to make high-carbon expensive and low-carbon low-cost; and

4. maximise the significant economic opportunity by stimulating domestic supply chains.

The Energy Department and the Department for Levelling Up, Housing and Communities jointly announced new government measures that they said were intended to 'help supportive communities take forward onshore wind projects' in England. Government had, they said, 'streamlined' planning rules, giving local areas 'a greater say' in how onshore wind projects should be considered. The new measures included ways of identifying suitable locations, including by communities, and 'speeding up' the process of allocating sites giving alternatives to the local plan process. This was intended to give the whole community a say, not just a small number of objectors.

Meanwhile planning policy is being changed to make clear onshore wind developments could be identified in several ways including Local Development Orders and Community Right to Build Orders.

Responding to the announcement, however, the Head of Onshore Wind at Renewable UK, James Robottom, said the proposed changes didn't go far enough. He described them as 'a slight softening at the edges but nothing more'.

Renewable UK called on the Government to take 'urgent action' to rebuild investor confidence in the UK offshore wind market following the DESNZ announcement of the results of the fifth round of Contracts for Difference, which showed 3.7GW of renewable capacity as successful. This was the lowest level since 2017, 35 per cent of last year's 10.8GW. The auction secured 1.9GW of solar at ￡47.00/MWh and 1.5GW of onshore wind capacity at ￡52.29/MWh, as well as 53MW of tidal power at ￡198.00/MWh, but no new offshore wind capacity.

So far, only 27GW had been secured out of the Government's 50GW offshore wind target for 2030. Meanwhile National Grid had forecast at least 73GW of offshore wind would be needed by 2035 to decarbonise the grid. Renewable UK's Chief Executive, Dan McGrail, commented: "Industry has warned that rising costs should have been properly priced into this auction. If the UK isn't offering prices that allow investors to make a return, they will simply invest elsewhere". He added: "This result for offshore wind means putting economic growth on hold, with over ￡10 billion in investment and thousands of jobs delayed".

The Defence and Security Accelerator (DASA) and DESNZ jointly announced the award of over ￡3 million in funding shared between two projects aiming to demonstrate technologies that could mitigate offshore wind farms' impacts and their interference on defence radar.

Hampshire-based LiveLink Aerospace was awarded up to ￡1.3 million to address the challenge of radar clutter caused by the rotating blades of wind turbines, by developing a series of small low-cost and robust air defence sensors that do not emit any signals themselves, and therefore do not interfere with the radar returns from the turbines. Nottinghamshire-based Trelleborg was awarded up to ￡1.8 million to deliver a project based on the use of advanced stealth materials in next-generation wind blades, to cause less interference with radar.

Alongside these awards, up to ￡500,000 was made available for Stream 2 of Windfarm Mitigation for UK Air Defence: Phase 3. This phase seeks to provide funding for innovators with expertise in modelling and testing the effectiveness of different mitigation technologies.

More positive moves for fusion DESNZ announced the Government planned to create what it described as 'an ambitious and cutting-edge suite' of new, alternative R&D programmes to support the UK's fusion sector and strengthen international collaboration, in support of the UK Fusion Strategy. (This followed the decision not to associate to the Euratom Research and Training programme (Euratom R&T) and the Fusion for Energy Programme as a result.) To deliver the intended package, the Government planned to invest up to ￡650 million until 2027, subject to business case approvals. This would be in addition to the ￡126 million announced in November 2022. While further details on the alternative programmes would be set out later in the autumn, the new alternative fusion R&D package would include:

1. new facilities, specifically to grow new fusion cycle capabilities and support innovation;

2. a new fusion skills package;

3. further support to strengthen international collaborative projects, and

4. other measures to accelerate the commercialisation of fusion, including the Spherical Tokamak for Energy Production programme.

Meanwhile the Government remained 'very open' to collaboration with the EU and other international partners. The Chief Executive of the UK Atomic Energy Authority, Sir Ian Chapman, welcomed the announcement for its 'clarity about our future relationship' with the Euratom R&T programme, as it provided the certainty needed by the sector.

DESNZ also announced six companies' designs had been selected to go forward to the next phase of the Small Modular Reactor (SMR) competition for innovative nuclear technologies. The six were: EDF, GE-Hitachi Nuclear Energy International LLC, Holtec Britain Ltd., NuScale Power, Rolls Royce SMR, and Westinghouse Electric Company UK Ltd. They are to be invited to bid for government contracts later this year, with successful companies to be announced in the spring of next year and contracts awarded in the summer.

Energy Security Secretary, Claire Coutinho, confirmed that from the 18th of the month, private investors could register interest in becoming prospective partners in the Sizewell C nuclear power project. The Government, the Sizewell C company and EDF (the project's lead developer) are seeking companies with substantial experience in the delivery of major infrastructure projects. Any investment is to be subject to 'strict national security checks'. DESNZ noted that to show its support for Sizewell C, the Government had so far invested ￡700 million – the first such direct public investment in a nuclear project for a generation – and ministers had also made ￡511 million 'available' to continue the project's development and prepare the Suffolk site for construction. The Chief Executive of EDF Energy, Simone Rossi, commented: 'The very significant investment that EDF continues to make in Britain at Hinkley Point C benefits Sizewell C through replication of the design and construction, and a proven supply chain'.

This article appeared in BUU Winter 2023 - read more ?? https://meucnetwork.co.uk/buu-winter-2023/