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The UK’s new Clean Growth Strategy

By Dave Elliott

Given the uncertainties about Brexit – when where, how, why and even if – there had been a striking lack of government policy activity in the energy field over the last few months. Many key issues seemed to be pushed into the future while we waited for the much delayed new Carbon plan and the Helm Price review. But the government has now finally come up with its new Clean Growth Strategy, as well as a (re) commitment (announced at the Tory party Conference) to a temporary energy price cap, though that may not start up until next year.

The Clean Growth Strategy is set up under the over-riding policy that ‘every action that the government takes to cut emissions must be done while ensuring our economy remains competitive’, so the emphasis is on low-cost options, which makes its continued commitment to nuclear a little odd. Otherwise it seems generally sensible, although not wildly ambitious – and it admits that the UK is currently on track to miss the fourth and fifth carbon budgets (p. 41). But BEIS expects emissions from businesses and the public sector to fall 30% from today’s levels by 2032.

In all, BEIS outlines how over £2.5bn of investment will be allocated to support low carbon innovation from 2015 to 2021 – although, note, some of this is already allocated/announced. It will provide ‘up to half a billion pounds for further Contract for Difference auctions for less established technologies, such as offshore wind, with the next one planned for spring 2019’, and ‘work with industry as they develop an ambitious Sector Deal for offshore wind, which could result in 10 gigawatts of new capacity, with the opportunity for additional deployment if this is cost effective, built in the 2020s’. It says This would mean up to £557 million for further Pot 2 Contract for Difference auctions, with the next one planned for spring 2019’. The existing Levy Control Framework, which capped this spending, will be replaced by a new set of controls beyond 2020/21 – to be set out ‘later this year’.

The strategy will also ‘deliver new nuclear power through Hinkley Point C and progress discussions with developers to secure a competitive price for future projects in the pipeline’. There’s also some (already announced) funding for R&D on new nuclear technology, including SMRs – around £480m. In addition, there’s around £500m funding through the BEIS Energy Innovation Programme, including up to £10m for innovations in low carbon heat in domestic and commercial buildings and up to £10m for innovations to improve the energy efficiency of existing buildings.

Interestingly there’s also up to £20m for a Carbon Capture and Utilisation (CCU) demonstration programme. The aim is to ‘demonstrate international leadership in carbon capture usage and storage (CCUS), by collaborating with global partners and investing up to £100m in leading edge CCUS and industrial innovation to drive down costs’. There will also be £1bn to support the take-up of ultra-low emission vehicles, including helping consumers to overcome the upfront cost of an electric car.

Overall then, an interesting, but mixed, package.  Certainly the aim to support around £3.6 bn of investment ‘to upgrade around a million homes through the Energy Company Obligation (ECO), and extend support for home energy efficiency improvements until 2028 at the current level of ECO funding’, was generally welcomed, but what about PV solar and onshore wind – and the rest? All we got was this: ‘We want to see more people investing in solar without government support and are currently considering options for our approach to small scale low carbon generation beyond 2019, and will provide an update later this year. More nascent technologies such as wave, tidal stream and tidal range, could also have a role in the long-term decarbonisation of the UK, but they will need to demonstrate how they can compete with other forms of generation.’ Nothing on new onshore wind, utility-scale PV, or the Swansea tidal lagoon in the next CfD – that’s still evidently focused on offshore wind.

The silence on on-shore wind (Scottish Islands apart) is odd. At the Tory Party conference, energy minister Richard Harrington said he saw ‘no reason’ why onshore wind projects shouldn’t compete against other forms of technology and get support if their costs were low enough and their planning permission had been granted. And RenewableUK’s Emma Pinchbeck said that some Tory MPs had expressed support for onshore wind, ‘because they’re focusing on consumers’ bills and they know that onshore wind is the cheapest way of generating new power. You can’t cap energy bills while denying the lowest cost option a chance to compete. Having seen the record-breaking fall in the cost of offshore wind, we now need to discover how much the cost of onshore wind has fallen too –  and that hasn’t been possible for over two and a half years because it’s been excluded from competitive auctions’.

Keith Anderson, CEO of ScottishPower Renewables, had earlier pointed out that: ‘it’s now cheaper, easier and faster to build onshore wind. In a little over 18 months we have built over 470 MW of onshore wind, delivering enough power for more than 280,000 homes and with it significant environmental and financial benefits for the UK. If the UK Government is serious about reducing carbon emissions and having enough clean power to support the huge expected growth in electric vehicles, then more onshore wind is essential. One new onshore wind turbine could power around 7,000 electric vehicles, but we need to act now to meet growing demand.’

However, that’s clearly not going to happen. So, as the Renewable Energy Association’s chief executive Nina Skorupska said, onshore wind and solar still remain ‘blocked to market’ with, in addition, bioenergy ‘forgotten’, whereas she insisted that ‘we cannot have a low cost, low carbon and secure energy transformation without these technologies’. Claire Mack, Scottish Renewables CEO, similarly lamented the continued exclusion of on shore wind and PV but, maybe optimistically, said we now look forward to seeing the outcome of the government’s cost of energy review, where we expect to see these lowest-cost technologies recognised as crucial for the delivery of cheap, clean power for Britain’s homes and businesses’.

So what next? The Green Alliance had said that with renewable costs falling, solar to around £60/MWh by 2030 and onshore wind to £39/MWh, the UK could accelerate ahead and it called for ‘an ambitious clean growth plan now’, with £1.7 bn for new CfD auctions between 2020-2025 to boost it. The new strategy is nowhere near as radical as that, and is still weak on transport (more is promised soon), but despite its shortcomings, and possible carbon offset fiddles to stay within the budget targets, it’s a start. Though it could have easily been more, and cheaper, if on-shore wind was included centrally. And utility-scale PV given a fair (CfD) deal.

As it is, in the longer term, while renewables (and nuclear) will continue to expand to provide power, and also possibly heat and transport, the government seems, once again, to be looking to carbon capture to allow for continued use of fossil gas, although, in one of its 2050 scenarios, it has green hydrogen taking over for heating and transport. Now that’s ambitious. Here’s a useful review.

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