Amber Rudd's Speech Outlines New Direction for UK Energy Policy
DECC have had a very busy morning, firstly they announced that Coal Power Stations were to be closed by 2025 and restricting there use by 2023. (Announcement here) The Secretary of State - Amber Rudd then made a major speech intended to announce the new direction for the UKs energy Policy. Elmhurst Energy has had a chance to read and reflect on the speech. The main theme from DECC was “How do we achieve an energy system that is secure; affordable; and clean?
Amber Rudd highlights Government intervention in the energy markets from Nigel Lawson’s breakup of nationalised monopolies, through a negative reflection of Tony Blair’s years where no power generation can be built without Government Intervention – so she states that the balance is not right. She wants the Government to be out of the way by 2025, but does suggest that Government will have to get involved mostly due to energy security “but that should diminish over time”.
According to Amber, Gas is a success story we have some of the cheapest and most secure in Europe, even though North Sea is declining production. The new LNG terminals and interconnectors are working well. But that we currently import 50% of our gas needs and this could be 75% by 2030.
Britain needs new interconnectors from Europe and new gas plants as well as new Nuclear. Gas is central to a secure energy future for Britain.
Acccording to DECC, nuclear is safe and reliable. The challenge is delivering it at a low cost. Stating that, Labour did not commission a new nuclear power station and that it has been left to the Conservatives to solve this problem. They are planning a new fleet of nuclear power stations at Wylfa and Moorside.
DECC states that the UK is world leading in this technology and this is scalable to make a big difference. Current plans are expected to see 10GW of offshore wind installed by 2020. However it is still too expensive. The Conservatives will not support this industry at any cost.
So if all the new gas power stations, nuclear and off shore wind comes on board it will help the UK meet its challenge of decarbonisation.
The UN Paris Climate Change Meeting was mentioned and all the above suggests a move towards the decarbonisation of the UK economy.
The Conservatives are committed to Climate Change Act and the UK 2050 target. The next Carbon Budgets are going to be tough, so next year they will be setting out there budgets for these. But they will only accept that bill payers can support low carbon power when the costs are controlled. The Liberal Democrat ran department (DECC) were then singled out as a department where “policy costs on bills had spiralled.” “Subsidy should be temporary, not a permanent business model;” refereeing to previous announcement in terms of FiTs and RHI subsidies. To back up these policy reversals , they claim that the UK has enough on shore wind to meet its 2020 expectations and that solar is well on course to meet the stated aim of 12GW by 2020.
Alluding to the fact that coal has for centuries played a central role, the Government wanted to show the world that we can live without it. Therefore they are launching a consultation in the Spring (2016) asking to close coal power stations by 2025 and restrict it use by 2023. This was then heavily caveated – they will “only proceed if we’re confident that the shift to new gas can be achieved within these timescales.”
Innovation is good, it is required, this will be backed by Government – but it is up to industry; the market will reveal which ones work and how much we need of them.
These are central to all businesses and homes. They will be installed in all of them by 2020. Claiming that “they will reduce costs by tens of billions of pounds over the decades ahead”. DECC will launch a paper setting out some of the possibilities and consult formally on the in the Spring 2016, allowing time to action the outcomes in the Autumn 2016.
Government will work alongside National Grid, National Infrastructure Commission, Ofgem and others to consider how to reform the current system operator model to make it more flexible and independent. They also believe that the North Sea (Gas and Oil) has more to give and as such is launching a consultation on a "Strategy to maximise the Economic Recovery of the North Sea”.
Innovation in Supply
DECC note that there is greater competition in the supply market, but that it is “far from perfect” - more work will need to be done. Especially on passing on wholesale gas prices drops to consumers, which remains “frustrating” to Amber Rudd.
DECC acknowledge that this is a vital component and that approx 45% of energy consumption and a third of all emissions come from heat. They claim that “progress has been slower here than in other parts of the our economy”. Technologies like destruct heating, biogas, hydrogen and heat pumps have great potential, but that these different approaches may not be scalable and that they need to be tested. DECC state that they will set out there approach to this sector next year, as part of strategy to meet carbon budgets.
It does get it own section in the speech, claiming that it is “one of the best ways to cut bills and cut carbon” The Tax framework is currently too complex and is in need of reform and they have recently consulted on this matter.
They state that 1.2m households are seeing lower bills due to energy improvements (ECO) over last 5 years and that another 1m will get the same benefit in next 5 years. She is determined to make sure that those in greatest need get the help that they need.
So no new news in this section, just a clarification that tjhere will be a continuation of the current ECO framework.
Research and Development:
Shale Gas gets its first mention as part of Nuclear and Gas power stations. Where a technology is scalable then Government will intervene, but only then. So shale gas appears to be scalable and will take its place in a energy mix.
DECC claim the following are the conclusions:
Greater competitions; tough on subsidies; concentrate only on scalable technologies; new gas replacing coal; new nuclear power stations; reducing cost of offshore wind; Government must enable, not dictate; the market should lead choices; Security of supply is top priority.
So here we go, coal may or may not be culled, if Gas can’t replace it in time. The Government is looking for new gas from connectors, north sea and LPG (boats) or fracking. The move towards gas power is like a stepping stone as it is cleaner than coal, but it is not renewable. Nuclear is already a part of the mix now and in future when they can be built.
Any technologies that exist at a small scale are not really worth it, and that only scalable solutions will do.
The conservatives time and time again, come away from regulation and want to make sure that they give a framework to let the market dictate. The only bit they will enforce is the security of supply.
An interesting first speech, not too much detail as the majority of consultations and announcements will come next year.
Very little if any information on energy efficiency and heating buildings in terms of startegy, they believe by dealing on the big stuff, the small stuff will take care of itself. Only time will tell.
Stuart Fairlie – Head of Technology – Elmhurst Energy
The full speech can be found here. https://www.gov.uk/government/speeches/amber-rudds-speech-on-a-new-direction-for-uk-energy-policy