Last reviewed 22 April 2022
The Government’s recently published energy security strategy aims to fast-track “home grown” fossil fuels, expand nuclear power, build more windfarms, and much more. John Barwise looks at the headliners — and what’s missing — and assesses whether the strategy can deliver on the UK’s future energy needs.
The energy security strategy comes amid soaring energy prices, driven largely by a surge in demand in the aftermath of the pandemic and volatility in global fossil fuel supplies, exacerbated by Russia’s invasion of Ukraine. Like other western economies, the UK’s exposure to volatile global energy prices underscores the urgent need for a national energy security.
The new strategy aims to shift the balance away from fossil fuel imports by strengthening “home grown” energy supplies. This is a tough call given that fossil fuels still make up around three-quarters of the UK’s energy mix.
Headlines at a glance
Oil and gas — new licensing rounds to extract more offshore oil and gas from the North Sea.
Electricity — low-carbon energy to deliver 95% of electricity by 2030.
Nuclear — expand nuclear power generation to 24GW to meet 25% of projected UK electricity demand by 2050.
Offshore windfarms — build more and speed up the planning process to achieve 50GW capacity by 2030.
Hydrogen power — deliver 10GW of low-carbon production capacity by 2030.
Other renewables — zero VAT and low-cost financing for rooftop solar plus limited onshore wind development.
Energy efficiency — no new targets and limited additional support.
The energy security strategy focuses on increasing domestic energy supply, including more “home grown” fossil fuels. But it also raises questions over how much of the UK’s oil and gas reserves can be exploited while ensuring 2050 net zero targets are met.
Energy Strategy in detail
The Government’s energy adviser, the Climate Change Committee (CCC), describes the energy strategy proposals as “hugely ambitious”, saying that they would bring the UK “closer to meeting the net-zero challenge”. But the CCC also expressed disappointment at the lack of any new measures in the strategy to drive energy efficiency improvements for businesses or domestic users faced with rising energy bills.
The UK needs a stable low-carbon baseload energy source to ensure reliability in the supply system, as well as variable renewable energy such as wind and solar.
Nuclear energy currently provides on average around 17% of UK electricity. The plan is to increase capacity to 24GW, generating around 25% of projected electricity demand by 2050. This is a challenge, given that five of our six existing plants will be offline within the decade and we currently have only one new project under construction.
Building nuclear power plants is expensive and time-consuming. Eight new nuclear reactors are planned at existing nuclear sites. The new Hinkley Point C nuclear plant in Somerset is expected to come on stream in about four years, at a cost of over £23 billion. Proposals for Sizewell C in Suffolk, which will cost around £20 billion and take 9–12 years to build, have yet to receive official confirmation. Plans for new nuclear reactors at Wylfa on Anglesey and Bradwell in Essex have yet to be finalised.
Smaller modular nuclear reactors (SMRs) are part of the Government’s multi-billion-pound nuclear programme. A Rolls-Royce-led consortium will design and build the modular units and aims to complete the first unit in the early 2030s, with up to 10 more by 2035. These will use existing technology but have never been built at scale, with construction likely to take a further four years at a cost of around £2 billion each.
The cost of decommissioning nuclear plant currently runs to around £3 billion a year and is likely to increase as more plants are retired. Then there’s the problem of storage. The UK currently has over 100,000 cubic metres of radioactive waste, most of which is in temporary storage at Sellafield in Cumbria. This will increase as more nuclear plant is built, but the UK still does not have a permanent geological disposal facility (GDF) to store the waste.
A new government body, Great British Nuclear, is being set up to bring forward new projects. In the short to medium term, operations at some of the UK’s aging nuclear reactor sites are likely to be extended.
Oil and gas
The Government has decided that further exploitation of North Sea oil and gas reserves is needed to reduce reliance on imported fossil fuels. Cambo oil and gas field in the North Sea, recently taken over by Ithaca Energy, has just had its licence extended, and more will follow.
Increasing North Sea production will help secure UK energy supplies, but prices are set by international markets and will have little effect on soaring domestic energy bills.
Fracking is also a possibility. The Government imposed a moratorium on fracking in England in 2019 following scientific evidence linking fracking operations to earthquakes at shale gas wells in Lancashire. Cuadrilla, the site owners, were ordered by the industry’s regulator to plug the wells by June this year.
The energy secretary has stalled that decision and asked the British Geological Survey to look again at whether new techniques could reduce the risk and magnitude of seismic events. The Government says it will take a precautionary approach and support shale gas exploration, “if it can be done in a safe and sustainable way”.
The Government says we still need oil and gas as we transition to low-carbon alternatives in the future and argues that exploiting UK reserves is a better option than relying on fossil fuel imports. Environmental campaigners say that increasing fossil fuel production in the North Sea and fracking shale gas goes against UK commitments under the Paris Agreement and threatens legally binding net zero emission targets. Local communities that live within proposed fracking areas also say that fracking is neither safe nor sustainable and will continue to protest developments in their areas.
Renewables enjoy widespread public support and will play a key role in the UK energy security strategy. At present, “home grown” renewables generate around 40% of UK electricity, reducing the need for fossil fuels and acting as a buffer against volatile international energy markets.
The UK has the largest offshore windfarm in the world. Total offshore wind capacity currently stands at around 14GW and will increase to around 40GW by 2030 under government plans. Figures released by RenewablesUK show this is achievable, given that projects totalling more than 75GW of capacity are already in the pipeline.
Onshore wind is arguably the most cost-effective low-carbon way of producing renewable electricity. Current installed capacity stands at around 12GW, but while more projects are in the pipeline for Scotland, projects in England have stalled due to government planning restrictions. Calls to relax planning restrictions have been resisted but the Government says it will consult on developing local partnerships for “certain” communities who wish to host new onshore windfarms, in return for lowering energy bills.
Installed capacity of solar photovoltaics has increased from 95 megawatts in 2010 to over 13,000 megawatts by the end of 2020, with costs also falling by around 85% over the same period. The Government is consulting on amending planning rules for ground-mounted and roof-mounted solar arrays.
Hydrogen can be stored in “fuel cells” and is widely seen as an alternative “green” fuel option for transport and heavy industry that currently rely on combustible fossil fuels. Over 90% of worldwide hydrogen is currently produced using fossil fuels, but renewable electricity can also power electrolysers that split water (H2O) into hydrogen and oxygen. The Government is backing both.
“Green” hydrogen from renewables, combined with “pink” hydrogen from nuclear power, is expected to generate 5GW. “Blue” hydrogen, which splits natural gas into hydrogen and carbon dioxide, is also included in the plan. Norway’s state oil company Equinor plans to build a “blue hydrogen” plant in Hull.
The plan is for up to 2GW of low-carbon hydrogen production capacity by 2025 and up to 10GW installed by 2030. There are also plans to blend up to 20% blue hydrogen into the natural gas grid. But critics argue blue hydrogen will extend natural gas production, which produces global warming gases, CO2 and menthane.
The Government will run a Heat Pump Investment Accelerator Competition in 2022, worth up to £30 million, to encourage more British-made heat pumps to reduce demand for gas. Grants of £5000 from April 2022 for homeowners to replace their gas boilers with low-carbon heat pumps were announced in the budget. The aim is for all new heating systems installed in UK homes by 2035 to be either using low-carbon technologies or supporting new technologies like hydrogen-ready boilers.
Other options in the energy strategy include exploring tidal and geothermal energy. The UK's tidal power resource is estimated to be more than 10 gigawatts (GW), with the potential to deliver 20% of current energy needs, but we currently generate less than 3% of our energy in this way. Tidal power is still expensive, but with more government support costs would fall, as they have for windfarms and solar. The case is similar with geothermal, with various studies estimating that the UK has sufficient geothermal resources to meet about 15% of the UK’s renewable heat targets.
The Government’s energy security strategy focuses on safeguarding energy supply, with little support for energy efficiency to reduce demand.
Over 90% of homes are heated by fossil fuels, accounting for a third of UK total gas use. Earlier funding arrangements include £1.8 billion funding for low-income households through the Home Upgrade Grant and the Social Housing Decarbonisation Fund, with additional funding for upgrading public sector buildings, but there is no new money. The Energy Company Obligation (ECO) scheme which also funds energy efficiency projects has been expanded to £1 billion per year, but this is paid through a levy on customer bills.
The energy strategy does include some additional measures such as VAT reductions for insulation, solar panels and heat pumps, but these options are conditional. The only measure in the energy strategy specifically designed to help businesses is for a new energy advice service to improve industrial energy efficiency.
Businesses, like domestic uses, are particularly exposed to rising energy bills, which are then passed on to consumers. The rising cost of energy is fuelling inflation. Funding to improve business energy efficiency could be implemented quickly and would result in immediate cost savings and reduced carbon emissions.
The energy security strategy sets out the Government’s plans for expanding the UK’s domestic energy supply system to 2050, with ambitious short-term targets to increase low carbon electricity by 2030.
Some of the options chosen, such as more nuclear power stations, will provide an energy baseload to replace fossil fuels, but these are expensive and will take years to come on stream. Expanding North Sea oil and gas has also raised concerns over whether the plan is deliverable in the timescale and whether legally binding net zero commitments will be compromised.
But the big failure in the strategy is the lack of any meaningful short-term measures to increase home-based supply or to reduce energy demand. For businesses and domestic consumers facing rising energy bills, the failure to capitalise on short-term energy solutions, such as onshore wind and solar power and energy efficiency measures, means more hardship to come.
At the time of writing, the CEOs of some of the UK’s largest energy firms have told Parliament’s Business, Energy and Industrial Strategy Committee that they expected the numbers in financial distress would rise to 40% from October and called on the Government to provide urgent and concrete financial support to struggling customers facing huge increases in their bills.