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Powering Up Britain: the UK's new Energy Security Plan

30 March 2023

The UK Government have today further enhanced their commitment to "providing affordable clean home grown power in Britain" by announcing their 2023 "Powering Up Britain - Energy Security Plan" ("ESP") 

DWF's Energy Team have taken a closer look at the Government's ESP and  summarise the key commercial and industrial measures, set out in the Plan, below:

1.    Strategy and Drivers

The invasion of Ukraine has amplified the need for UK's energy security to become 'independent, secure and resilient' to the effects of political turmoil. For example, the UK Government have re-iterated their desire for such energy security to improve, energy independence to be consistent with net zero and to reduce the risk of higher bills. As such, the UK Government's ESP continues to promote and compliment their Net Zero Growth Plan and British Energy Security Strategy established last year.

2.    Decisive Action for Winter and Next 

Following the introduction and implementation of the Energy Price Guarantee in 2022-2023, the Government have committed to a number of measures to support households through the continuing energy price rise. Further details of these measures are set out in the ESP. 

3.    Enhancing Security of Gas supply

The Government have assessed that the on-going invasion of Ukraine means the UK may experience 'similar pressures on energy security next winter as those seen in 2022-23'. To circumvent this risk, the Government have recognised a number of 'key commitments' to enhancing Britain's gas supply, highlighting the following key points in their Plan:

  • Maximising supply of UK gas:-
    • The North Sea Transition Authority launched the 33rd oil and gas exploration licensing round in October 2022. Bids are being analysed and  the Authority  is expected to award the first licences from the second quarter of 2023;
    • Accelerating production - Gas and Oil New Projects Regulatory Accelerators is a cross-regulator initiative that is aiming to cut the approval times for consents to potentially bring forward new project production dates (subject to environmental considerations).
    • Implementing legislative change to the Gas Safety (Management) Regulations which, will come into force in April 2025. This amendment will permit a greater volume of gas from the UK Continental Shelf to, be injected into the UK National Transmission System without the need for blending. 
  • Maintaining and securing our gas import and export capacity:- 
    • The Government is in the final stages of agreeing a Memorandum of Understanding on gas security of supply with Ireland in order to enhance cooperation on gas security and emergency preparedness across Great Britain, Northern Ireland, and Ireland.
    • The Government is working with various industry sector leaders and providers to increase LNG import capacity. For example, the operators of the Grain and South Hook LNG terminals are investing in upgrades to their facilities to increase capacity.
  • Focus on International relationships:- 
    • The Government have continued to work with their European Partners and those beyond the EU (through their Strategic Energy Dialogues) in sharing information about energy prices, supply and demand, trends and challenges. 
    • Whilst transition to clean energy remains at the forefront of this Plan, the Government have had to also consider the risk and impact on the challenging minerals market. In particular the potential for 'price spikes, disruption to supply chains and the demand'. In the last year, the Government announced their partnership with Republic of South Africa and collaborations with Canada and Khazakstan on critical minerals, mining and energy.  
  • Increasing system resilience by:
    • Establishing the Future System Operator (FSO) whose role shall include legislative objective to ensure security of supply across both the gas and electricity sectors; The Government shall consider if there is a need for greater UK gas storage capacity – an update will be issued in relation to this, in autumn 2023. 
    • Working with NGT to increase the available volumes for industrial demand reduction for winter 2023-24. 
    • Investigating options for how domestic and smaller business gas consumers could participate more in future schemes.
  • Ensuring long term investment in gas networks through:-
    • Increasing volumes of domestically produced biomethane which will be injected into the gas grid through the Green Gas Support Scheme (GGSS). This is anticipated to reduce carbon emissions, decrease reliance on natural gas and provide diversity in gas supply.
    • Recognising that Hydrogen has the potential to form an increasing part of the energy mix. 
    • A review of other low-carbon technologies, such as heat pumps, which are anticipated to also reduce the demand for gas.

4.    Energy Efficient and Clean Heat

In order to build on their current commitments in supporting households and industry through the energy price rise and moving towards household energy efficiency and clean heat, the Government have set out in their ESP the following key targets to reduce final energy demand from buildings and industry by 15% by 2030. Their "Key Commitments" included the following initiatives; 

  • Improving the energy performance of buildings by:-
    • Publishing of the new Energy Companies Obligation Scheme and  The Great British Insulation Scheme, alongside this ESP  to deliver '£1 billon additional investment by March 2026 in energy efficiency upgrades, such as loft and cavity wall insulation';
    • Initiating a consultation on the improvement of Future Homes Standard for homes and Future Buildings Standard (with the intention to then introduce the necessary legislation in 2024 to implement both from 2025);
    • Providing grant funding to a range of organisations to test novel green finance products through the Green Home Finance Accelerator;
    • Delivering Phase 2 of the Home Upgrade Grant from April 2023;
    • Delivering Wave 2 of the Social Housing Decarbonisation Fund from April 2023;
    • Continuing to support the decarbonisation of the public sector, with £1.425bn in grant funding for low-carbon heat and energy efficiency retrofits made available over the period 2022/23-2024/25
  • Supporting the roll-out of energy efficient products using 'minimum energy performance standards and strengthen energy labelling requirements for energy-using products, to help reduce their energy demand.' A consultation on lighting, shall open until 2023, followed by other technologies. 
    • Exploring how the energy retail market can support improved energy efficiency in the Review of Energy Market Arrangements.
  • Delivering on their commitment to replace fossil fuel heating with clean heat alternatives. In order to do this the Government will consider and respond to consultations concerning:
    • The phase out of all new and replacement natural gas boilers by 2035 (including consideration of the Net Zero Review recommendations in relation to this proposal); and 
    • The phase out new and replacement fossil fuel heating systems for off gas grid properties 

In addition to the 'Key Commitments' set out above, the Government have further announced, within their ESP the following funded initiatives;

  • A £30 million Heat Pump Investment Accelerator competition, to incentivise the UK manufacture of heat pumps to improve supply of low-carbon heat;
  • Extension of the Boiler Upgrade Scheme to 2028;
  • Implementation of the Clean Heat Market Mechanism in 2024, a market-based incentive for manufacturers to increase installation of low-carbon heating systems relative to the sale of fossil fuel boilers;
  • Announcement of the location of the hydrogen heating village trial later in 2023;
  • Extension of capital support to the Green Heat Network Fund and the Heat Network Efficiency Scheme to 2028; 
  • Capital support for the Heat Network Transformation Programme over 2025/6 and 2026/7.

5.    A future of cheap clean British energy

The ESP sets out the Government's desire to protect households and businesses by lowering the costs of the energy we consume and reducing the volumes used. To do so means moving from fossil fuels to 'home-grown' clean energy.  

In order to achieve this a number of goals have been set out in the ESP including the Government's commitment to achieve 'fully decarbonised electricity by 2035'. Their ambitious goal  'for Britain to have among the cheapest wholesale electricity prices in Europe by 2035', is set out in the:

The ESP has set out in detail a number of the Government's key updates and commitments in the nuclear, hydrogen and renewable energies sectors, which we have sought to encapsulate below;  

Nuclear generation:

The British Energy Security Strategy set out the Government's ambition for deploying up to 24 gigawatts of nuclear generated energy by 2050. The ESP includes an update to the Government's first nuclear power station at Hinkley Point C and Sizewell C (in partnership with EDF). 

The Government's focus on the future deployment of nuclear energy generation has included the establishment of the Great British Nuclear to lead delivery of the new nuclear programme.  

There is also a clear focus to secure additional pipeline projects comprising, 'a mixture of technologies including Small Modular Reactors (SMRs), Advanced Modular Reactors (AMRs) and gigawatt-scale reactors'. In addition to this the Government will seek to support the development of Advanced Modular Reactors, through the Advanced Nuclear Fund.

Renewables (CfDs/ Offshore Wind/ Onshore Wind/ Solar/ Bioenergy):

Low-cost renewables will be central to the Government's goal to achieve energy security. This will involve improving networks and grid connections. A key change has also been the move to annual Contract for Difference (CfD) auctions. 

The ESP refers the Government's desire to explore the potential for international projects to provide 'clean and affordable power'. The ESP references 'the Xlinks project', a proposed large scale onshore wind, solar and battery electricity generation site in Morocco that would exclusively supply power to the GB grid via high voltage direct current subsea cables. 

Planning reform has been highlighted as an important focus area, whereby there is a clear ambition to  'cut the time taken to build renewable electricity plants' but to also create a conducive planning environment to ensure clean energy development opportunities have a unhindered route to market. There is a clear focus on reviewing (and fast-tracking) consenting timeframes, in particular for certain Nationally Significant Infrastructure Projects

With regards the future divers to progress Offshore wind energies, again, projects that meet the necessary quality criteria will benefit from the new Fast Track consenting process being implemented in the Levelling Up and Regeneration Bill, the Government is also launching the Floating Offshore Wind Manufacturing Investment Scheme, to provide up to £160 million to kick start investment in port infrastructure projects. 

The ESP states that the Government will establish a solar government-industry taskforce and we will publish a solar roadmap setting out a clear step by step deployment trajectory to achieve 70GW of solar by 2035. There is also a clear goal to facilitate low-cost finance from retail lenders for homes and small business premises. The theme of planning reform continues, whereby the Government is consulting on changes to permitted development rights in order to simplify planning processes for larger commercial rooftop installations and introduce a new permitted development right for solar canopies on non-domestic carparks. The Future Homes and Building Standards to be published later in 2023, will explore how to drive onsite renewable electricity generation, such as through rooftop solar where appropriate in new homes and buildings

The Government will publish the Biomass Strategy by the end of June 2023 to review the amount of sustainable biomass available to the UK and how this resource could be best utilised across the economy. As part of the Government's Biomass policy statement, published in 2021 the Government’s position that bioenergy with carbon capture and storage (BECCS) can play a role in contributing to net zero. 

Carbon Capture, Usage and Storage ("CCUS")

The ESP places a clear focus on the power of CCUS and other flexible technologies. DWF recently published a report, noting that CCUS is a clear focus area in the Energy Sector. 

6.    Markets and affordability

The ESP has set out a number of focus areas for the Government, with respect to affordability of energy. Again the ESP sets out their key focus areas as follows:

  • a consultation in Summer 2023 on options for a new approach to consumer protection in the energy markets from April 2024 onwards. 
  • consultation on the future of the price cap on default tariffs in summer 2023 
  • outlining a clear approach to gas vs. electricity ‘rebalancing’ by the end of 2023/4 
  • launching a Call for Evidence in summer 2023 on how the regulatory framework needs to evolve to support new ways of offering energy supply.

Future Government Consultation

Alongside this ESP, the Government shall be publishing five revised energy NPSs Powering Up Britain – ESP 30 covering Renewables, Oil and Gas Pipelines, Electricity Networks, Gas Generation, and an overarching Energy Statement for consultation. These reflect the importance of energy security and net zero with clear, strong statements of national need for new energy infrastructure which can help expedite planning. 

Summary of the Key Commitments

The Government have set out the following key commitments in their Energy Security Plan:

  • to issue an update by the autumn looking at the future role that gas storage and other sources of flexibility can play in gas security.
  • to deliver vital energy efficiency upgrades through the Great British Insulation Scheme and extend the Boiler Upgrade Scheme to 2028 to further encourage the adoption of clean heat technologies.
  • to set up Great British Nuclear, with the responsibility to lead delivery of the new nuclear programme, backed with the funding it needs
  • to launch a competitive process to select the best Small Modular Reactor technologies, with the first phase commencing in April 2023.
  • to launch the Floating Offshore Wind Manufacturing Investment Scheme, to provide up to £160 million to kick start investment in port infrastructure projects
  • to publish action plans this year on reducing the development time for transmission network projects and on accelerating electricity network connections
  • announce the Track-1 negotiation project list of carbon capture projects; announce a process to enable expansion of the Track-1 clusters and have launched Track-2 of the CCUS cluster sequencing process to establish two further CCUS clusters.
  • announce a shortlist of projects for the first electrolytic hydrogen production allocation round (capital co-funding and revenue support) which we intend to enter due diligence with and intend to launch a second allocation round in Q4 2023.
  • announce successful applicants of the first competition window for Strands 1 and 2 of the Net Zero Hydrogen Fund (development and capital co-funding) and intend to launch a second competition window in the spring, to be run by UKRI.
  • publish for consultation revised energy National Policy Statements which underline the national need for new energy infrastructure with the intention of expediting planning processes.
  • consultation in summer 2023 on options for a new approach to consumer protection in the energy markets from April 2024 onwards and on the future of the price cap on default tariffs.
  • acceptance of the Independent Review of Net Zero recommendation that Government should commit to outlining a clear approach to gas vs. electricity ‘rebalancing’ by the end of 2023/4 and should make significant progress affecting relative prices by the end of 2024.  

The ESP has revealed a number of initiatives, proposals and consultations, that all endeavour to drive the UK towards greater energy security. With this, there are clear drivers, such as the focus on Renewable and Nuclear Energy and recognition that CCUS is a crucial part of the changing energy sector landscape.

To discuss the Energy Transition/Net Zero, Energy Security and resilience or anything related to the Energy sector, get in touch with one of DWF's Energy team today. 

Further Reading