Is the latest energy plan fit for purpose?

Following the publication of the Energy Security Plan, Utility Week has poured over more than 2,800 pages of official documents to breakdown government's stance on the future of the UK's energy efficiency and production. Industry experts also have their say on which parts of the plan are up to the challenge and where is falls short.

When Boris Johnson’s British Energy Security Strategy was published, almost exactly a year ago, the 38-page document was criticised as being long on targets but short on detail, reflecting the character of the then prime minister’s administration.

The diligent nature of Johnson’s successor but one was on show in Rishi Sunak’s much more detailed Energy Security Plan, which was published last week. Together with the associated documents, which spewed out from the freshly minted Department for Energy Security and Net Zero (DESNZ), it runs to an estimated 2,800 pages.

“It’s not just big bets on nuclear and offshore wind, which is what they announced last year,” says Alex Gray, head of public affairs at Energy UK, who hopes that the weighty nature of last week’s announcements is a sign that the government has “really woken up” to the scale of the energy security challenge that the UK faces.

And while the UK escaped widely anticipated blackouts during the past winter, it is far from out of the woods yet, he says: “The wholesale prices are still pretty unstable so we’re not quite sure what is going to happen.”

Much will depend on whether the political will exists to prioritise action on energy security, says Emma Woodward, project lead advisory at consultancy Aurora.

“It will very much depend on whether people going into it (next winter) with the same concern.”

And the government has a lot else on its plate, like the thousands of documents of EU legislation that it has pledged to axe by the end of this year, says Gray: “The government just needs to get cracking as soon as possible on it. Just looking politically, they’re running out of time.

“The key test now which they’ll be measured on in terms of improving energy security is getting some of this stuff urgently passed.”

So how does the plan, officially entitled ‘Powering Up Britain’, measure up to the scale of the challenge facing the UK on the areas that matter to utilities?

ENERGY EFFICIENCY

Often the bridesmaid, never the bride: so often, that is the fate of energy efficiency.

There have been steps forward over the past year, such as a target to cut UK energy consumption by 15% by the end of this decade and the establishment of a new energy efficiency taskforce.

However last week’s announcement contained slim pickings for energy efficiency.

The transformation of ECO+ into the admittedly snappier Great British Insulation Scheme is dismissed as simply “a rebranding exercise” by Juliet Phillips, senior policy advisor at thinktank E3G.

And the rebranding is not accompanied with any fresh cash says Adam Bell, director of policy at consultancy Stonehaven, who is nevertheless pleased that the government is finally taking forward the long-stalled process of improving the energy performance of private rented sector homes.

But given that this commitment merely extends to outlining an intent to respond to a consultation, which concluded more than two years ago, Phillips sees this as a “kicking the can down the road” exercise by a government still “hostage to the vested interest of landlords.”

And even after last month’s £1.8 billion allocation of funding for energy efficiency and decarbonised heat, the government is yet to divvy out just over £2 billion of the £6.6 billion pledged for tackling these issues in the 2019 Conservative party manifesto, she adds.

Overall last week’s plan is a “real missed opportunity” to provide clarity and confidence around energy efficiency, Phillips says.

The hope, she adds, is that DESNZ’s recently established energy efficiency taskforce can make a really strong case to the government about the need for urgent action.

HEAT

While progress in last week’s announcement on energy efficiency may have been disappointing, there appears to have been greater movement on the thorny issue of decarbonising home heating.

The government has said it has rejected the recommendation of ex-energy minister Chris Skidmore’s review that its proposed ambition to phase out natural gas boilers by 2035 should be brought forward by two years, while saying that the proposal will be given ‘further’ consideration.

However the £450 million per annum Boiler Upgrade Scheme (BUS), which provides grants of up to £5,000 for households switching to heat pumps, will be extended until 2028.

And the Clean Heat Market Mechanism (CHMM), which is designed to ensure that a certain number of heat pumps are installed for every fossil fuel boiler sold, has been confirmed with a go-ahead date of next year.

In addition, Powering Up Britain contained £30 million of seed money to stimulate the manufacture and supply of heat pumps as well as £220 million of capital investment to support the roll out of heat networks.

But probably the significant move in the document is the government’s commitment to set out plans during the next year to rebalance gas and electricity costs in household bills by cutting the latter at the former’s expense.

Behind the Whitehall speak the plan is couched in, which he recognises as a former senior civil servant, Bell sees acknowledgment in the government’s announcement that gas will play a “diminishing role”.

“This is the first time the government has really made that plain that, as an ambition, it wants to displace certain chunks of the (gas) network,” he says, adding that the “very, very vague” language in the document points to government starting to look at how to manage a retreat that is intentionally driven by its own policy.

“It’s challenging for the gas networks to engage with. The government is saying you’re going to lose some of the edges of your network you might otherwise have had.”

Bell says the extension of the BUS potentially provides a subsidy for some of the devices that will be installed under the CHMM market mandate.

On hydrogen too, the direction of travel looks a little less opaque than it did prior to the plan.

While the largest hydrogen home heating trial in the Cheshire village of Whitby appears to be running into quicksand, announcements in Powering Up Britain have given the heat pump lobby a fresh spring in its step.

Ministers’ official line is that a decision on hydrogen in home heating will be made in 2026 when the various trials have concluded, but officials privately see this option “slowly dying a death of 1,000 cuts” before then, says Bell: “They won’t explicitly say don’t do hydrogen for heat but what we’re going to see in the next few years is more salami slices of government policymaking that make it harder to envisage a long-term role for hydrogen and heating.”

This will especially be the case if rebalancing of electricity and gas shifts the market by making heat pumps get so cheap that installing them become a “no brainer”, he adds.

Phillips agrees. “Reading between the lines, the documents last week provided a very strong signal in favour of heat electrification,” she says, adding that heavy industrial users with no option but to use hydrogen in order to decarbonise their processes are also putting pressure on the government to ensure that their access to a scarce commodity isn’t swallowed up by home heating.

At last week’s Aurora Spring Forum in Oxford, DESNZ deputy energy security director Robert Hewitt mused on the greater value that hydrogen potentially has for running peaking power plants rather than home heating.

But the government needs to be more explicit in order to avoid giving false hope that hydrogen boilers will be a mass market option, says Phillips: “The government needs to be very clear about which homes, if any, will be using hydrogen so there’s not a nationwide rollout of hydrogen ready boilers. Let’s just crack on with this.”

GAS

Natural gas will though remain a key element of UK energy security, Powering Up Britain makes clear.

There are few fresh details on further steps to increase the provision of gas storage facilities, like an extension of Centrica’s Rough facility, beyond a promised update on the issue in the autumn.

However the document says the Future System Operator, which is being set up under the Energy Security Bill currently going through Parliament, will be tasked with assessing the UK’s gas supply security.

The methodology for this assessment, covering the availability and reliability of gas sources over a five-to-10-year period, will be published this summer, it says.

Getting the FSO to evaluate the medium-term outlook for gas security of supply is an interesting move, says Stonehaven’s Bell: “They will have to make judgments about the relative reliability of different sorts of trading partners to discharge that duty effectively.

“It’s difficult to see what sort of assessment they could really do. The barometer is very much whether having this sort of assessment would have helped us better manage the risk Putin’s Russia imposed to our energy supply. If it can’t answer that question positively, then it’s isn’t clear what it’s there for.”

NETWORKS AND RENEWABLES

This week the government’s offshore wind champion Tim Pick, has warned that the UK will fall short by 10GW of Boris Johnson’s ambition of 50GW of offshore wind power by 2030 unless it can resolve delays on planning and connecting grid infrastructure.

Powering Up Britain says the government will publish an action plan this year in response to Electricity Networks Commissioner Nick Winser’s recommendations on halving the development time for transmission network projects, which are due to be delivered in the summer. And a fresh consultation will take place this autumn on the government’s wide-ranging Review of Electricity Market Arrangements.

The most tangible moves on networks emerging from last week’s announcement though was a beefing up of backing for offshore wind power and associated network infrastructure in the planning process.

The latest revisions to the energy National Policy Statements, which were finally published, propose that offshore wind projects and allied grid infrastructure should be reclassed as critical national infrastructure.

Ana Musat, executive director of policy at RenewableUK, believes it was good to see a recommitment to the headline offshore wind targets formulated during Boris Johnson’s government.

However, she says, the plan still leaves unaddressed some of the key barriers to renewables roll out, particularly planning and grid connections.

The government’s move to fast-track offshore wind and linked transmission infrastructure as critical infrastructure is promising, she says: “That effectively enables us to fast track those projects and ensure that we don’t get bogged down in debates with communities. Hopefully, that’s really going to help us build much faster.”

EUK’s Gray says the movement on fast tracking the planning process for offshore wind is particularly welcome, given that this is a particularly sensitive issue in East Anglia, which is dominated in Parliament by the Tories.

And the £160 million of support being offered for developing a wind manufacturing and supply chain for a fledgeling UK floating offshore wind industry is a good first step, says Musat.

However the government’s continuing reluctance to level the planning playing field for onshore wind remains a bugbear, she says: “It was touted by the prime minister as being the reversal of the de facto ban on onshore wind. We don’t think that’s really the case.”

It would be “great” to have something like the solar task force, which was announced last week, for onshore wind.

But probably the biggest headache for the renewables sector is the government’s sluggish response to the largesse being offered for low carbon investment via the US government’s Inflation Reduction Act (IRA) and the EU’s counter subsidy offer.

Chancellor of the exchequer Jeremy Hunt has said he will formulate a response by the autumn, meaning that those investing in the UK will have to do with relatively short term incentives, like the three-year capital allowances announced in last month’s Budget, Musat says: “We need to have something similar (to the IRA) here. It’s not necessarily about offering the same size of subsidy package, because obviously we’re a smaller economy but it’s about having something on a more permanent basis.”