Much has been written about how the UK needs to become a low-carbon economy, but less about how that will be achieved. On 15 July the Government provided some answers.
The UK Low Carbon Transition Plan sets out how the UK will meet the cuts in greenhouse gas emissions set down in the new carbon budgets, and is supported by three sector-specific strategy documents: the Low Carbon Industrial Strategy, the Renewable Energy Strategy and ‘Low Carbon Transport: A Greener Future’.
The policy announcements amount to some 750 pages, so it is impossible to do them justice in anything less than a lengthy article, but they are ambitious to say the least. If the Government’s ambitions are realised, we will get 40 per cent of our electricity from low-carbon energy by 2020.
Despite the rhetoric, delivering a low-carbon UK may be easier said than done. Taking one example, the Government has pledged to provide financial support for up to four commercial-scale carbon capture and storage (CCS) demonstration projects and will be requiring that all new coal-fired power stations have CCS capabilities. Capturing and compressing CO2 uses a large amount of energy, estimated at between 10 and 40 per cent of the energy produced by a power station. On average this will require the construction of a fifth power station for every four new ones that use CCS.
Another argument used by the Government to support CCS is security of supply and to reduce dependence on imported gas (principally from Russia), but this argument carries little weight when one considers that the UK imports approximately 35 per cent of its coal from Russia. This may lead to a resurgence of the UK’s coal industry, but even if CCS does not succeed in the UK, the UK will have the project management, financial and legal expertise to develop CCS projects globally, so there will still be opportunities for business.
There will need to be a massive expansion of the renewables sector over the next 10 years if the UK is to hit the proposed 30 per cent target for renewable electricity generation. This will inevitably give rise to a large number of projects requiring financial, technical and legal input. There is also likely to be a backlash by interest groups against projects, similar to what we are seeing at the moment in terms of objections and legal challenges to wind farms. The creation of the Infrastructure Planning Commission to determine planning applications for nationally significant infrastructure projects is unlikely to reduce the number of challenges and may even increase them. The potential for competition between the nuclear and renewables sectors for funding and for priority in the planning system should not be overlooked either. The Confederation of British Industry’s recent comments, essentially calling on the Government to choose between nuclear and renewables, have increased the risk of a schism between them. These comments are unhelpful, as all energy players need to work together. No single sector has the monopoly on the solution.
The main support mechanism for renewables in the future is likely to remain the Renewables Obligation. Originally introduced in 2002, it was reformed last year to introduce different incentive bandings for different renewable technologies and changed again in this year’s Budget to provide increased incentives for offshore wind projects. The Renewable Energy Strategy is now proposing further changes. While increased incentives for renewables are to be welcomed, constantly changing these them does not provide legal certainty and hinders investment decision-making.
As with all route-maps, there will be unforeseen diversions and dead-ends. The only certainty in all this, however, is that working in the energy sector over the next few years is not going to be dull.