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In brief

On 30 March, the UK Government released a package of policy plans related to decarbonisation and energy initiatives it has termed “Powering Up Britain”.  Originally promoted as “green day” in Whitehall, many saw the release as the Government’s potential unveiling of a new, more detailed plan for achieving net zero emissions, as well as the UK’s response to substantial state subsidy programs announced by the US and EU. More recently, the Government sought to temper those expectations, with the release being rebranded “Energy Security Day”.


In depth

Indeed, what was released does reflect a broadening of the Government’s ambition beyond net zero to cover different aspects of energy security policy. While what was presented falls short of the EU or US positions on subsidising the Energy Transition, we do see substantial positive changes to what the Government has announced previously, as well as important confirmation that net zero ambitions and initiatives published under previous leaders will be continued under the current Prime Minister, Rishi Sunak.

The three main documents comprising the “Powering Up Britain” (“PUB”) agenda comprise:

  • The core Powering Up Britain document which summaries the actions the UK has already taken on reducing net emissions while describing the Government’s position on a number of net zero related matters, including certain changes;
  • The Powering Up Britain – The Net Zero Growth Plan which details the actions the Government will be taking (mostly into the 2030s); and
  • The Powering Up Britain – Energy Security Plan (“ESP“) which details the Government’s plans to deliver energy security to UK consumers (some actions duplicate those in the Net Zero Growth Plan while others such as the Government’s intentions to grow local natural gas supply are described only in the ESP).

The vast majority of the three documents build on what the Government has published before – there is no radical shift in the Government’s position – but there is welcome clarity on several of the Government’s open positions, as well as some changes and confirmation of the Government’s current priorities.

Major aspects of PUB in brief

Energy Security

The Government remains committed to its plans outlined in its 2022 ‘British Energy Security Strategy’. The ESP details that the North Sea Transition Authority will continue maximising offshore oil and gas production in the UK and, of 115 bids received in last year’s licensing round, expects to award the first licenses in Q2 2023. It also noted the continuing work of the Gas and Oil New Projects Regulatory Accelerators, as a cross-regulator initiative, which aim to cut the approval times for new projects and bring forward production dates for projects which already have a license.

Nuclear and Carbon Capture, Use and Storage (“CCUS”)

Nuclear energy and CCUS have been the two big winners in recent policy announcements by this Government and this continues under PUB.

For nuclear, a new organization, Great British Nuclear (GBN) will be created to lead delivery of new nuclear projects and achieve the government’s goal of 24GW of new nuclear by 2050. PUB itself does not provide for a timetable of new projects or how they will be financed, but the Government has confirmed its ambitions to reach a Final Investment Decision on Sizewell C by the end of this Parliament (expected at the end of 2024) and two more nuclear projects by the end of the following Parliament (assuming it wins the next election).

The Government has also confirmed it will launch a competitive process to select the best Small Module Reactors (SMRs) technologies, commencing in April 2023 and concluding by this Autumn. The selected technologies will form a basis for new nuclear projects moving forward with the Government undertaking to co-fund them through their development.

For CCUS, aside from the GBP 20 billion allocated to early deployment of CCUS in the Spring Budget, the Government commits to launching processes for deployment of “Track-2” clusters which would enable the Government to achieve its announced goal of 20-30mtpa of carbon storage and four operational clusters by 2030 (two clusters are already accounted for in “Track-1”).

Renewables and Hydrogen

The Government acknowledges the importance of these sectors to achieve net zero goals without announcing much in the way of new funding or a change in approach.

Starting from this March’s allocation round for CfDs, the government commits to annual new rounds (if not the amounts for each round). As with the already commenced March round, there will be separate “pots” for established and emerging technologies, including floating wind.

The Government acknowledges frequent calls to reduce the time taken for permitting new projects with a number of new measures, including a fast-track consenting timeframe for “Nationally Significant Infrastructure Projects”. The solar sector will gain a new government-industry taskforce and will publish a solar roadmap setting out details of the trajectory needed to achieve the Government’s goal of 70GW by 2035. The Government also gives important confirmation that the categorisation of agricultural land will not be adjusted in ways that may constrain solar deployment.

For offshore wind, the Government is launching the Floating Offshore Wind Manufacturing Investment Scheme (FLOWMIS) which will provide up to GBP 160 million to kick-start investment in port infrastructure for floating wind.

For hydrogen, the Government has confirmed the first winning projects from the already established GBP 240 million Net Zero Hydrogen Fund and is announcing a shortlist of projects for the first electrolytic hydrogen production allocation round, with the second round to be launched in Q4 2023.

Power pricing

ESP announces a goal to ensure the UK has “among” the cheapest wholesale electricity prices in Europe by 2035, alongside the aim of fully decarbonising the electricity system by the same date, subject to security of supply.

Government has accepted the Skidmore Review recommendation that it should commit to outlining a clear approach to gas vs. electricity ‘rebalancing’ (by decoupling gas and electricity prices). It intends to do this by the end of 2023/4 with resulting impacts affecting consumers by the end of 2024. This approach should help to shift residences and business to lower-carbon technologies like heat pumps although exactly how the Government will approach this is currently unclear.

The Government also intends to consult in summer 2023 on options for a new approach to consumer protection in the energy markets from April 2024 onwards and on the future of the price cap on default tariffs.

Transport

Along with PUB, Government has published a final consultation on the Zero Emission Vehicle mandate, requiring that from 2024 an increasing percentage of manufacturers’ new car and van sales are zero emission.

This compares to new landmark laws from the EU, with EU countries announcing they will require that all new cars sold must have 55% lower emissions by 2030 and from 2035 must have zero emissions. 

Additional funding 

The Government committed additional funds for a number of initiatives, including extending the Boiler Upgrade Scheme for three years, a further GBP 30 million for heat pumps, GBP 1 billion for the Great British Insulation Scheme (rebranding the previous ECO+ scheme) which will improve energy efficiency for an additional 300,000 homes, an additional GBP 350 million investment in electric vehicle charging infrastructure and a further GBP 185 million extension to the Industrial Energy Transformation Fund.

Further Plans

As part of PUB, the Government has committed to providing further plans and proposals on a wide range of net zero related matters including

  • consultation, in 2023, on the need and potential design options for market intervention to support hydrogen to power;
  • later this year, an action plan on halving the development time for transmission network projects;
  • hydrogen transport and storage infrastructure business models (with supporting legislation);
  • throughout 2023, a series of net zero investment roadmaps articulating investments needs by sector as well as a roadmap on heat pumps and updated roadmaps on hydrogen and CCUS; and
  • also this year, setting up a long-term pathway for the UK Emissions Trading Scheme.

Conclusion

Overall, PUB can be seen as an evolution rather than a step-change in the UK’s net zero efforts, but it contains a number of measures that will be of interest to UK businesses, and as importantly, a useful clarification of the Government’s priorities.

Author

Richard Blunt is a partner in Baker McKenzie London's Corporate Department, where he leads the Energy, Mining and Infrastructure Group.

Author

Andrew Hedges is a climate change and clean energy lawyer based in London. He works on a range of transactions driven by the ongoing transition to a low carbon economy. His expertise spans the development of renewable energy projects, energy efficiency, sustainable energy procurement (including long term corporate PPAs) and carbon finance. Andrew also provides regulatory advice impacting on the design of a range of energy transactions. Andrew is ranked as a Band 1 individual by Chambers Global.

Author

Philip is a Partner based in the London office who specialises in transactions in the energy and infrastructure sectors.

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