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New Energy World
New Energy World embraces the whole energy industry as it connects and converges to address the decarbonisation challenge. It covers progress being made across the industry, from the dynamics under way to reduce emissions in oil and gas, through improvements to the efficiency of energy conversion and use, to cutting-edge initiatives in renewable and low carbon technologies.
Net zero review calls on UK government to move further and faster
Former UK Energy Minister Chris Skidmore has published his independent review of government climate and energy policies, setting out the ‘historic opportunity’ offered by net zero and suggesting that the UK must go further and faster. The review makes 129 recommendations, all to seize opportunities from creating a green economy in the UK. Meanwhile, the UK government has unveiled its new business energy bills discount scheme to operate from April.
The UK’s leadership on tackling climate change has delivered real change at home and helped to lead to a global transformation, states Skidmore in his review, Mission Zero, but more should be done to reap the economic benefits that presents.
The review makes 129 recommendations covering areas including the greater role that business can be supported to play, making better use of infrastructure and delivering more energy efficient homes. Every recommendation is designed to maximise economic investment, opportunities and jobs – all while working towards achieving legally binding targets to reach net zero carbon emissions by 2050.
The proposals include:
- Backing business – these include reviewing incentives for investment in decarbonisation, including via the tax system, and launching a ‘Help to Grow Green’ campaign offering information and advice to small businesses.
- Backing local action – these include reforming the planning system to put net zero at its heart nationally and locally, and backing at least one Trailblazer Net Zero City, local authority and community that can work towards reaching net zero by 2030.
- Delivering energy efficient homes – including legislating for the Future Homes Standard so that no new homes will be built with a gas boiler from 2025, and adopting a 10-year mission to make heat pumps a widespread technology in the UK.
- Using infrastructure to unlock net zero – including developing a cross-sectoral infrastructure strategy by 2025 to support the building and adaptation for new green energy sources such as hydrogen to support the green economy.
Skidmore was commissioned to lead his rapid review of the government’s approach to delivering its net zero target by former Secretary of State for Business and Energy Jacob Rees-Mogg last September, following major changes to the economic and political landscape with Russia’s illegal invasion of Ukraine.
The review is split into two parts, with the first part exploring the opportunity and benefits to individuals and the economy, emphasising that the UK must go further and faster to realise economic benefits. The second part sets out a roadmap for how government and industry can work to better exploit the opportunities and catalyse action in individual sectors of the economy.
Commenting on the review, Energy Institute CEO Nick Wayth CEng FEI says: ‘Chris Skidmore has published the right review at the right time, not just for the detail of its recommendations, but for three profoundly persuasive reasons. It underscores first and foremost that the path to net zero isn’t just about the urgency of slowing the impacts of climate change, but also in the long-term interests of Britain’s hard-pressed consumers and businesses. Second, it reminds us that this is not just a race to net zero emission here in the UK, but globally, and so therefore a race for competitive advantage in the global clean energy economy.’
‘Finally, if ministers respond in the right way, the review is an important moment of reaffirmation of the UK’s cross-party consensus on energy and climate, and the investor confidence, cost reductions and moral leadership that flow from it.’
UK government unveils new business energy bills discount scheme
Meanwhile, the UK government has outlined its new energy bill discount scheme for businesses, charities and the public sector that will be implemented once the current initiative finishes at the end of March 2022 and will run for the next year.
The current package of support for non-domestic users through this winter is expected to cost some £18bn and was intended as a bridge to allow businesses to adapt to sky-rocketing energy costs.
The government reports that the latest data shows wholesale gas prices have now fallen to levels just before Putin’s invasion of Ukraine and have almost halved since the current scheme was announced. As a result, the new scheme aims to ‘strike a balance between supporting businesses over the next 12 months and limiting taxpayer’s exposure to volatile energy markets’, with a cap set at £5.5bn.
From 1 April 2023 to 31 March 2024, eligible non-domestic customers who have a contract with a licensed energy supplier will see a unit discount of up to £6.97/MWh automatically applied to their gas bill and a unit discount of up to £19.61/MWh applied to their electricity bill. This will be subject to a wholesale price threshold, set with reference to the support provided for domestic consumers, of £107/MWh for gas and £302/MWh for electricity. This means that businesses experiencing energy costs below this level will not receive support.
A substantially higher level of support will be provided to businesses in sectors identified as being the most energy and trade intensive – predominately manufacturing industries. These firms are often less able to pass through cost to their customers due to international competition.
These businesses will receive a discount reflecting the difference between a price threshold and the relevant wholesale price. The price threshold for the scheme will be £99/MWh for gas and £185/MWh for electricity. This discount will only apply to 70% of energy volumes and will be subject to a ‘maximum discount’ of £40/MWh for gas and £89.1/MWh for electricity.
Proposed reform of UK’s capacity market
The UK government has also outlined proposals to reform the UK’s capacity market, to ensure it is fit for a net zero future while ensuring the security of the country’s electricity supply.
The capacity market uses competitive auctions to make sure there is enough reliable capacity to meet the UK’s peak electricity demands, safeguarding against the possibility of future blackouts. Since its introduction in 2014, the landscape in which the scheme has operated has shifted, with renewable energy now making up a significant proportion of the UK’s electricity generation system.
The government has outlined action plans to ensure the scheme keeps pace with this transition to cleaner energy sources and technologies – which are often cheaper than fossil fuel counterparts – and can support the delivery of a decarbonised power system by 2035, without compromising security of supply.
This includes consulting on new contracts for low-carbon technologies to incentivise their participation in capacity market auctions, and creating new timelines and requirements for oil and gas generators to reduce emissions from 2034, such as through implementing carbon capture and hydrogen to decarbonise, and reducing running hours.
Lightening the load on energy bills
Separately, the UK government has also put forward proposals to improve lighting efficiency in a bid to lower energy bills. The new proposals would introduce performance standards that are higher than regulations currently in place in either the US or European Union (EU).
According to the government, switching to more efficient lighting could save a household around £2,000 to £3,000 over the lifetime of the bulbs, depending on the size of the home.
If adopted, the proposals would come into force in late 2023, with further increased minimum standards introduced from September 2027.
Call for national ‘war effort’ on energy
Meanwhile, the UK Parliament’s Environmental Audit Committee (EAC) has published a new report that sets out how the UK can accelerate the transition away from fossil fuels and secure energy supplies to tackle the energy affordability, security and sustainability crises facing the country.
The UK remains dependent on fossil fuels for 78% of its energy needs and, as a result of Russia’s invasion of Ukraine, the country has been exposed to the biggest global fossil fuel price shock since the 1970s. While the government’s British Energy Security Strategy sets out ambitions for low-carbon electricity generation, there remain significant gaps, states the EAC.
As a result, it is calling for a national mobilisation, or ‘war effort’, on energy efficiency to reduce household energy bills, cut emissions and reduce reliance on fossil fuel imports. It is also calling for greater focus on the potential of onshore wind to be rolled out rapidly in the short term, and tidal energy to contribute to the UK’s energy security baseload in the long term.
The EAC argues that ending the UK’s reliance on fossil fuels will spur net zero and low-carbon energy generation, while reducing exposure to the energy price crisis that Russia’s war in Ukraine has provoked.
To continue to demonstrate its international climate leadership, the Committee is calling for the government to set a clear date for ending new oil and gas licensing rounds. The MPs are also calling for faster action from the oil and gas sector to reduce its operational emissions produced during oil and gas extraction, suggesting that the upstream emissions reduction targets currently set under the North Sea Transition Deal are not stretching enough.
The Committee also recommends that the Department for Transport consults on measures to improve energy security, reduce oil demand and cut emissions from transport.
Scottish proposals for a just transition
In other news, the Scottish government has published a draft Energy Strategy and Just Transition Plan that aims to ‘deliver a fair and secure zero carbon energy system’ and sets out a plan for Scotland’s renewables revolution to be accelerated as North Sea basin resources decline.
Key policy proposals published for consultation include substantially increasing the current level of 13.4 GW of renewable electricity generation capacity, with an additional 20 GW by 2030, which could produce the equivalent of nearly 50% of current demand; and an ambition for 5 GW of renewable and low-carbon hydrogen power by 2030, and 25 GW by 2045.