Energy security: will we get browner before we go greener? 

April, 2022 - Shoosmiths LLP

The headlines of the just announced energy strategy were already well known and the comments of ‘missed opportunities’ by various interested parties were equally predictable.


Green targets to reduce demand such as energy efficiency measures and improving home insulation have fallen by the wayside, as have those for businesses and organisations on the demand side, with no mention of measures such as plant and equipment switching, on-site renewables or fuel switching.  Meanwhile, beleaguered bill payers will be upset to discover no further financial support has been ear-marked within the announcement.


The PM has hailed the new strategy by saying in the official government press release:


“We’re setting out bold plans to scale up and accelerate affordable, clean and secure energy made in Britain, for Britain — from new nuclear to offshore wind — in the decade ahead. This will reduce our dependence on power sources exposed to volatile international prices we cannot control, so we can enjoy greater energy self-sufficiency with cheaper bills.”


Key points of the new energy strategy

  • Nuclear – a new body called Great British Nuclear will work on eight new nuclear reactors by 2030. It’s hoped that up to 24GW (around 25% of the UK’s projected energy demand) will come from nuclear by 2050.
  • Wind - planning reforms will cut approval times for new offshore wind farms but the earlier Department for Business, Energy and Industrial Strategy (BEIS) target for 45GW of onshore wind by 2035 has been ditched following open dissent within government and the Conservative party. Onshore wind farms will be developed only in partnership with "supportive communities" who want to host turbines in exchange for guaranteed cheaper energy bills.
  • Hydrogen - Targets for hydrogen production are being doubled to help provide cleaner energy for industry as well as for power, transport and potentially heating.
  • Solar - The government will consider reforming rules for installing solar panels on homes and commercial buildings to help increase the current solar capacity by up to five times by 2035.
  • Oil and gas - A new licensing round for North Sea projects is being launched in the summer on the basis that producing gas in the UK has a lower carbon footprint than doing so abroad.
  • Heat pumps - There will be a £30m "heat pump investment accelerator competition" to make British heat pumps which reduce demand for gas.

Offshore Wind

James-Wood Robertson, head of Shoosmiths Energy and Infrastructure sector, suggests that increasing the target for ‘floating’ offshore wind farms, which has the potential to produce up to 50 gigawatts - more than enough to power every home in the UK - is more than simply politically expedient given Conservative party opposition to onshore wind.


It recognises that the market has been doing a very good job in this sector without any significant government guidance or intervention. Indeed on 09 March this year Scottish Power and Shell announced a £75m investment in offshore floating wind projects off Scotland’s east coast.  £50m is earmarked for the MarramWind and CampionWind schemes, with £25m for the ScotWind project.


However, in terms of onshore wind, James feels that it is ‘disappointing but not entirely surprising’ that there has not been more express encouragement and facilitation for this, and that onshore wind and solar targets and messaging seem to be ‘significantly watered down’ from positions leaked earlier in the week.  This is a familiar approach taken by this government with a lack of policy support for onshore wind and solar despite stating in its White Paper in December 2020 that “Onshore wind and solar will be key building blocks of the future generation mix, along with offshore wind”.


New nuclear

The emphasis on nuclear is no surprise as the prime minister hosted a roundtable at Downing Street on 21 March with leaders from the nuclear industry to discuss how to rapidly accelerate nuclear projects. The government seems to have renewed enthusiasm for nuclear, having already committed £210 million to develop small modular reactors (SMRs) in the UK, and confirmed advanced plans to approve two new reactors at Sizewell in Suffolk during this parliament. The new strategy expects one new nuclear power plant to be approved each year until 2030.


The decision to boost nuclear has drawn a mixed reaction. Some environmentalists say it's too expensive and too dangerous, but other climate campaigners believe nuclear must be part of the energy mix. James points out that nuclear power plants are more complex than other large-scale power generation plants, are much more capital-intensive and generally take longer to construct and come on stream. Typically, a nuclear power plant will take over five years to construct whereas wind and photovoltaic (PV) systems are proven technologies whose engineering is well understood and are much quicker and cheaper to build and commission.


Oil and gas

A massive increase in North Sea oil and gas production has been a key demand of Tory MPs, but thus far the strategy proposes a new licensing round (which will start in six months time – not exactly a rapid response) for North Sea projects on the basis that producing gas in the UK has a lower carbon footprint than doing so abroad.


The question of fracking is also sidestepped, with the announcement of a scientific review of shale gas this week. It remains to be seen whether the government’s 2019 moratorium on fracking, which led the Oil and Gas Authority, the industry regulator, to order the sealing of the wells, could be overturned.


James is concerned that there is a danger of going backwards to achieve the goal of energy self-reliance. Instead of predominantly investing in clean renewable generation, the temptation may be further exploit existing national fossil fuel reserves and to import cheap gas from fracking and coal for power stations from the USA, which will have excess capacity in those commodities if the clean energy stimulus package is approved by Congress. He says:


“After years of progress in shifting away from coal and oil, if countries were to resume fossil fuel use, it would spell disaster for attempts to cut greenhouse gas emissions. The latest Intergovernmental Panel on Climate Change report suggests that climate breakdown is accelerating rapidly, with many of the impacts likely to be more severe than predicted and now only a narrow chance of avoiding climate catastrophe.”


Hydrogen

There is certainly a role for hydrogen in any future energy mix.  Hydrogen is already used in buses, trains and trucks and the government announced its £240m Net Zero Hydrogen Fund in the last spending review, which it is claimed will unlock £4 billion worth of investment by 2030. But James suggests that hydrogen, in the UK at least, is still a nascent market.


Whether hydrogen can replace natural gas for heating also remains problematic. Such a conversion would be much more challenging than the conversion from town gas to natural gas in the 1960s and 70s. There is nowhere in the world that supplies pure hydrogen to homes and businesses and that is a daunting prospect when around 85% of UK homes use gas-fired central heating and gas for cooking. Up to a third of the UK’s greenhouse emissions come from central heating (10 times more than the amount created by aviation). Greening this system is a huge challenge.


The main issue with hydrogen as a replacement for domestic and business gas supply is that, while the UK’s remaining 91,000 km of iron mains infrastructure is reasonably gastight for methane, it tends to be very porous when it comes to hydrogen. The gas reacts with the old metal pipes, making them brittle and prone to failure. The gas industry has been systematically replacing the metal pipes with yellow polyethylene ones and maintains 90% of the pipes will have been replaced by 2030.


Green vs Grey hydrogen

However, even if hydrogen is a viable option for domestic heating, James maintains that the short-term pressure and desire to achieve self-sufficiency quickly could mean turning again to fossil fuels to produce this apparently ‘green’ energy source:


“Hydrogen may be the most abundant molecule in the universe, but it isn’t present on Earth in its free form. First, you must produce it. So called ‘green hydrogen’ can be produced cleanly using electrolysis to split water into hydrogen and oxygen powered by renewable electricity from solar and wind power.”


But James points out that the cheaper and much more prevalent method by which most hydrogen is currently produced is to extract it from natural gas which is split into hydrogen and CO2 either by Steam Methane Reforming or Auto Thermal Reforming (so called grey or dirty hydrogen). However, this process emits carbon dioxide and locks us into further reliance on fossil fuels.


The key question, as with any major government announcement, is whether the substance of the new strategy matches the ambition while building a green domestic energy industry this decade. There is for example no mention of Carbon Capture Usage and Storage (CCUS) technology that removes carbon from the atmosphere which was recently suggested as an essential tool in avoiding an extremely dangerous future by scientists on the UN's Intergovernmental Panel on Climate Change (IPCC).


In addition, the question of just how truly self-reliant in energy generation the UK can ever be, even with massive renewables investment, is moot since our electricity supply also depends heavily on electricity interconnectors (high-voltage cables that connect the electricity systems of neighbouring countries) enabling excess power, such as that generated from wind and solar farms, to be traded and shared.


Time will tell which path the government will follow in its drive for domestic energy generation and security of supply, but the evidence, and the experience of Shoosmiths Energy and Infrastructure team, shows that the market will continue to back proven renewable technologies (wind, solar/PV) which can demonstrate a good return on investment and help save the planet.


 



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