The UK faces three energy challenges — to meet them will require a bold and ambitious long-term strategy
Today the Government finally unveiled its eagerly awaited energy strategy.
There are some steps in the right direction, especially the new focus on nuclear and offshore wind, but overall, it is underwhelming. Energy efficiency is largely neglected, there is little attempt to mitigate the impact of energy price rises, and abandoning plans for onshore wind expansion stinks of political short-termism.
This lack of ambition is a problem because it comes at a time when the UK faces three urgent challenges in energy policy.
The first of these is the rising cost of energy and the subsequent cost of living crisis. The Government needs to implement policies now which will reduce energy prices in the coming years and prevent such a crisis reoccurring in the future.
The second is the need to achieve energy security. The Russian invasion of Ukraine has highlighted the critical importance of decoupling Western energy needs from Russian supply, but energy security would also enable the UK market to better insulate itself from geopolitical shocks and global market fluctuations.
The third is the necessity of managing the transition to renewables to combat climate change and prepare for a future without fossil fuels. Fossil fuel dependence is damaging to both the environment and the UK’s ability to achieve energy security and mitigate price rises.
To meet these challenges the UK needs to take a long-term approach, one which will require a bold and ambitious set of policy changes. Since the problems thrown up by these three challenges are not independent of one another, meeting them will call for a strategy which is comprehensive and coherent.
What would such a strategy entail?
Focus on nuclear and renewables
Nuclear strategy is the silver lining in the Government’s plan. The new government body, Great British Nuclear, and the Future Nuclear Enabling Fund are good ideas. Pledging to build a number of new large-scale reactors and accelerate the delivery of these is wise, as is noting the potential of small modular reactors, which would be cheaper and easier to produce and run. The Government would be sensible to work closely with France, which has already started investing heavily in developing small modular reactors.
Solar and wind (onshore and offshore) needs to be significantly scaled up. Onshore wind is the cheapest and quickest energy source to get up and running and has huge potential. To facilitate this expansion will require the immediate reviewing and easing of planning laws to remove obstacles to new wind and solar farms. Polls have shown clear majority support (70% support to 9% opposed) among the British public for such reforms. The Government needs to be brave and face down opposition from its back benchers in the long-term national interest — our energy future cannot be subject to the whims of a few nimbies.
Investment in other renewables, such as tidal, should be increased. There is potential to produce large amounts of energy through tidal stream power, however underwater turbines are expensive to install. The Government should invest more in bringing these costs down to open up the full potential of tidal power.
Subsidies for renewables should be restored and ringfenced. Cameron era cuts to subsidies ravaged the solar industry and have undoubtedly contributed to the serious challenges we face today. Reversing them would help to create a large and innovative private renewable energy sector, provide a significant boost to wind and solar production, and lead to greater supplies of cheap renewable energy.
National grid infrastructure will need to be upgraded. Significant investment will be required to ensure the network is upgraded in line with the scale up of renewables, enabling it to manage increased capacity in areas where there will be large scale renewable farms.
Move away from fossil fuels
Reliance on Russian oil should be reduced and replaced with supplies from Western allies until the scale up of renewables and increased energy efficiency can plug the gap. The UK is fortunate that, unlike much of Europe, Russian oil and gas only makes up a small proportion of total supply. More geopolitically secure sources, particularly the US, but also Canada, Norway, and others can cover supply for the short term.
Conditions should be put on new North Sea oil and gas licences. Handing out new oil and gas licences for North Sea producers is far from the most cost effective or forward-thinking way to increase energy security or manage the transition to renewables — it would be slow, expensive and contribute to climate change. However, if the Government is to go down this route, it should at the very least ensure that licences go to British firms and that it gets something significant back in return. Conditions should be put on licences, such as timelines and funding commitments for investment in renewables and transition of companies’ logistics and infrastructure to serve this. Reform of taxation is also necessary to put an end to the absurd scenario where North Sea producers receive net tax repayments despite their huge profits.
The moratorium on fracking should be made permanent. Fracking is not the answer to the UK’s energy needs — never mind the concerns over earth tremors, it is expensive and slow, has small reserves and little long-term profitability, would be sold at market prices, has little public support, and is terrible for the environment.
Increase energy efficiency
To reduce demand the Government should conduct a public information campaign to encourage people to reduce their household energy use. This would have the added benefit of reducing people’s energy bills. According to climate think tank E3G, measures such as turning down the “flow temperature” on condensing boilers or setting the thermostat a degree lower would reduce energy use without compromising comfort.
Housing developers should be required to build with energy efficiency in mind. The Government should set and enforce higher energy efficiency standards– with a legal requirement that all new builds be EPC A rated or be EPC B rated with a heat pump rather than a gas boiler. This requirement could then be raised to EPC A rated with a heat pump by 2030. New homes should also be required to come with solar panels fitted on the roofs.
Finally, there should be more funding provided to help make existing buildings more energy efficient. The zero rate of VAT for the 5 years on the installation of energy saving materials is a good start, but the Government can go further. E3G has suggested the Government change stamp duty so energy efficient homes pay a lower rate, with a rebate that can be claimed within two years to incentivise buyers to improve the energy performance of their homes.
Greater investment in heat pumps and the training for more engineers to install them would enable gas boilers to be phased out more quickly, reducing energy bills and carbon emissions. The Energy & Climate Intelligence Unit (ECIU) has found that heat pumps will be on average £260 a year cheaper to operate than gas boilers from April 2022.
Improving insulation would also reduce energy bills — providing funding to fit homes with adequate loft insulation would be the most cost-effective measure. ECIU analysis has revealed that UK energy demand met by Russian gas could be wiped out in just five years through better insulation and installation of electric heat pumps. It is therefore essential that the Government draws up a national retrofitting strategy.
