The UK Energy Strategy – a critical appraisal by Professor Michael Grubb
7 April 2022
UCL Institute for Sustainable Resources Deputy Director Professor Michael Grubb reflects on the UK Energy Strategy.
Written by Michael Grubb, Professor of Energy and Climate Change
The defining feature of this Energy Strategy is incoherence. It doesn’t know what problem it is trying to solve – and thus fails to solve any. By ignoring energy efficiency and kicking the only possible short-term supply option into the long grass, by “consulting” about cheap onshore wind through “local partnerships” in a “limited number of supportive communities in England” – it most certainly won't help families struggling with energy bills for the coming winters.
No doubt, the PM wanted more – but apparently surrendered to back benchers and some diehard Cabinet opponents of energy efficiency and onshore wind. Who then should be held to account for failing to help increasingly desperate families?
I can’t comment on the proposals for energy efficiency – there don’t seem to be any. What follows are brief comments on energy supply.
Wind energy has been the great success story of the past decade. Up from almost nothing fifteen years ago, we are approaching 25 GW split almost equally between offshore and onshore generation. After the government effectively blocked most onshore in 2015, we’ve shown we can go offshore where capacity has grown sharply in recent years. The strategy ups the offshore target for 2030 from 40 to 50GW.
That’s very ambitious but possible. At that level, wind (including existing onshore) would supply around two-thirds of current UK electricity demand, but UK demand is projected to rise with Electric Vehicles and Heat Pumps. Wind generates more in winter, when energy demand and gas prices are highest.
But offshore wind involved very big and complex kit from only a few suppliers, it usually takes 3-4 years from contract to completion, and the pace of expansion could stress supply chains and drive up costs. If it were all concentrated in the North Sea, there would be immense challenges for the grid - both transmission, and in managing the peaks and the troughs. Wind is best when distributed more widely.
The most stunning and cowardly failure in the Strategy concerns onshore wind. It is not only our cheapest energy resource – onshore wind would typically cost about third to a quarter of what people are now paying for their electricity. It is, along with solar, the only one that could make a dent in the short term. Any energy company or local authority can buy a wind turbine off-the-shelf. It would take a few weeks or months to install. But getting planning consent would take years – because the planning regulations were redesigned in 2015 to stop it. To “consult” with a “limited number of supportive communities” on our cheapest and quickest option for clean, cheap energy is hardly a Churchillian response to our national energy crisis.
50GW of solar PV – about four times current levels - was being floated, but doesn’t in the end appear in the Strategy. When the government first introduced incentives for solar, the capacity rocketed from 1 to 10GW within barely 3 years, so 50GW would be possible within a few years. 50GW PV would supply around 20% of UK currently UK electricity demand. There is little solar in mid-winter, but it would be a great complement to wind energy and take pressure off gas during long summer wind lulls, and annual needs particularly if the UK developed inter-seasonal gas storage – another silence in the strategy.
The Strategy proposes 24GW of nuclear power capacity by 2050, from 6.9GW at present. The initial proposal is to commit one new plant, likely the £20bn Sizewell C project in Suffolk, before the next general election. That illustrates the problem – or rather three – facing nuclear:
- It is slow. Based on all our past experience, a new big nuclear would take a decade. If it takes an energy crisis for the government to actually take a decision, sobeit, but it wont help to solve the crisis.
- It is expensive. Nuclear depends on public subsidy, with the government committed to taking a sizeable financial stake to make it viable.
- A nuclear fleet would need to be flexible, to ramp up and down with the swings of demand, wind, and solar, which further undermines the economics.
The Treasury might be pressured into forking out for Sizewell, but don’t expect them to underwrite 24GW, let alone see any of that built in this decade.
North Sea oil and gas
The Strategy confirms plans to issue licences this year for production from existing discoveries, considered as “pretty much ready to go” if oil and gas companies would exploit them. If and when those do get onstream, they won’t affect the price since producers sell on international oil and gas markets – I doubt they’d touch these assets otherwise. And there is a reason why UK output has been declining – we’ve depleted a lot of our reserves, and it will get harder and/or more costly to get more out. We can stave off the decline a bit. And in the aftermath of the IPCC reports on climate change, it is – rightly - a tough sell trying to tell the world that we need to move away from fossil fuels, whilst aiming to squeeze out every drop from the North Sea.
Proposals to re-open the door to fracking – somewhat muted, it seems - upset environmentalists. Probably, they shouldn’t be too worried – apart from the wider signal it sends. A decade ago many European countries opened up for Shale exploration and almost nothing came of it. You need to drill dozens, maybe hundreds of wells just to find out exactly what is down there and what it will take to get it out. Whatever the government does, don’t hold your breath for shale to be – if and when anything actually emerges – anything more than an uneconomic trickle. It sure won’t help with our energy prices.
The government has reassured us all that the government will not consider rationing gas supplies, unlike some European countries that have set in motion contingency plans. The UK is indeed in a slightly different position, because our supplies are mainly divided between North Sea – Norway, and our own - and global trade in liquified natural gas.
But our pockets – and the Treasury – should be worried. In the Russia-EU standoff, if either side really cuts off the gas, all hell will break loose in the international markets, and we would have to outbid both the EU and Asia for gas supplies. That wont be pretty. Indeed It could look like the oil shocks of the 1970s which rocked the entire global economy, and slashed GDP growth globally. The UK would be just a bit player in that, and the energy strategy does nothing for that scenario either.
The ultimate irony of a Strategy borne of a crisis is that by the time most of its proposals see fruition – if they do – the crisis will be long past. Global energy markets will have completed their gyrations and returned to normal, and Putin probably will no longer be in power.
But a lot of consumers will have suffered horribly. We also risk undermining much that the UK has achieved on climate change. By failing to focus centrally on a joined-up strategy to solve these twin crises together, it fails to offer the energy sector the consistent signals that investors need, and may even worsen the short-term bills crisis, whilst our international credibility teeters on a knife-edge.
7 April 2022
An abbreviated version of this article appeared in the Financial Times