Five things you need to know about the Energy White Paper
After months of delays, the UK Government finally unveiled its Energy White Paper on Monday (14 December) detailing how an overhaul to transport, energy and infrastructure will deliver an "overwhelmingly decarbonised power in the 2030s" on the road to net-zero by 2050.
The White Paper builds on the Prime Minister’s Ten Point Plan for a Green Industrial Revolution and the National Infrastructure Strategy (NIS) in outlining how the nation plans to transform its power and heating systems to support the net-zero emissions target for 2050. In fact, much of the 166-page report is spent reiterating commitments to renewables and green buildings that have been announced earlier in the year. Read an in-depth summary here.
However, it also provides a great detail of certainty for businesses and green groups as to how the national energy and electricity mix will change over the next 20 years. As such, the White Paper has been broadly welcomed. Read the reaction here.
But for those who don’t have the time to delve through the pages of the White Paper, edie has outlined FIVE key policies that have been championed by the Government that will drive the nation towards net-zero.
1) It outlines plans for a national Emissions Trading Scheme
As part of the most recent Budget announcement, the Government confirmed that the Carbon Price Support will continue to operate at £18 per tonne of CO2 up to 2022. After the Brexit transition period, the UK will aim to apply an “ambitious carbon price” that could be linked to the EU ETS.
The ETS works by setting a cap on the total amount of greenhouse gases that can be emitted by energy-intensive industries, including aviation, power generation and steel manufacturing. The cap is then reduced over time so that overall emissions from each sector fall. UK factories are able to purchase carbon allowances to cover emissions, which can be purchased at auction or traded. Currently, around one-third of UK emissions and 1,000 factories and plants are covered by the EU ETS and will be covered under the new UK variant.
The White Paper confirms the creation of a UK variant that will be introduced on 1 January 2021. The document notes that the Government is “open to linking the UK ETS internationally in principle” but no preferred linking partners have been confirmed.
The UK ETS has been designed by the UK government jointly with the Scottish Government, Welsh Government and Northern Ireland Executive. The Government first proposed changes to the system in the summer. Published by the Department for Business, Energy and Industrial Strategy (BEIS), the proposals aim to deliver consistency for operators that are used to the EU ETS, but does commit to reducing the current emissions caps for carbon-intensive industries by 5% compared to the European system.
2) Funding has been ringfenced for nuclear
The inclusion of nuclear in the government’s net-zero ambitions has been a polarising decision. However, the White Paper continues to outline the role the nuclear will play as part of a net-zero transition.
The White Paper confirms that the Government will enter negotiations with EDF over the Sizewell C nuclear project in Suffolk. The Government wants to explore new funding options to enable investment in at least one nuclear power station by the end of this Parliament.
This includes the creation of an Advanced Nuclear Fund of up to £385m to support the development of Small Modular Reactors and to support research and development into more advanced nuclear technologies, such as advanced modular reactors to help them reach commercialisation.
The White Paper also outlines that a range of financing options for nuclear will be explored, including the Regulated Asset Base (RAB) funding model, which could help secure private investment and cost consumers less in the long run.
3) It places carbon capture at the heart of a levelling up agenda
Back in 2015, the Government axed a £1bn competition to assist the commercialisation of carbon capture technologies and projects. As part of the Prime Minister’s Ten Point Plan, more than £1bn has been earmarked for state-of-the-art carbon capture storage technologies to be introduced at four industrial clusters by 2030. These clusters will be set up in the 2030s with at least one of them to become fully net-zero by 2040.
The White Paper notes that this ambition will play a key role in a levelling up agenda that aims to equip different regions with the means to reach net-zero.
Clusters are located in the North West, Teesside, Humberside, Grangemouth, South Wales and Southampton. BP, Eni, Equinor, Shell and Total have all signed up to spearhead the development of the Net-Zero Teesside project, which focuses heavily on the use of carbon capture, utilisation and storage technology (CCUS).
Elsewhere, Drax, Equinor and National Grid have published roadmaps fleshing out their plans to create the world’s first zero-carbon industrial hub in the Humber region by 2040. As part of the Industrial Clusters Mission, the Government opened two innovation funds in October aimed at helping businesses located in key industrial clusters to plan and deploy technology to help reach net-zero emissions by 2050. Up to £140m could be accessed by successful applicants. The North West cluster will focus heavily on hydrogen, with the North West Hydrogen Alliance’s (NWHA) chair professor Joe Howe claiming that attracting new talent to the sector is vital to the delivery of net-zero.
4) It is aiming to diversify the clean energy mix
Much like nuclear, there are concerns that hydrogen isn’t in alignment with the requirements of the net-zero transition.
Research suggests that around 500TWh of hydrogen-generated power could be consumed annually in the UK by 2050 – equivalent to 50% of national demand – while generating £18bn for the UK economy and support more than 75,000 jobs over the next 15 years.
Currently, however, around 95% of global hydrogen production comes from fossil fuel feedstocks. As such, the White Paper commits to “kickstarting the hydrogen economy” by working with the industry to create 5GW of production. This was announced in the Ten Point Plan, but a new £240m net-zero Hydrogen Fund will be established.
It creates the picture that the UK is diversifying its clean energy mix, with the Government increasing the number of technologies supported by the Contracts for Difference scheme in the latest round, with offshore wind, onshore wind, solar, tidal and floating offshore wind projects all eligible to bid. It marks the first time that floating offshore has been eligible for the scheme and the first time since 2015 that onshore wind and solar have been included. The commitment to 40GW of offshore wind is also repeated in the White Paper.
5) Those reliant on fossil fuels will be supported in the transition
There has been a lot of talk about the need for a “just” transition to a net-zero economy, and the White Paper aims to start aspects of this transition.
Families living in fuel-poor buildings, for example, will have access to grants to save money on energy bills. It does include a £6.7bn support system for fuel poor households that will run for six years. The package is designed to save families in old inefficient homes up to £400. In addition, the Warm Home Discount Scheme will run to 2026 and will cover 750,000 UK householders by giving them £150 off of electricity bills each winter. The White Paper also confirms that the £2bn Green Homes Grant announced in the summer will be extended by a further year, as envisioned in the Ten Point Plan. In addition, installations of electric heat pumps are scheduled to grow from 30,000 per year to 600,000 by 2038, which is expected to benefit households.
For sectors currently relying on fossil fuel production, the White Paper also alludes to supporting sectors and regions in decarbonising.
Take the North Sea oil and gas sector, for example. The Scottish Government’s Expenditure and Revenue Scotland (GERS) report for 2019-20 shows that the nation’s share of North Sea energy tax receipts fell by almost 50% over a 12-month period to £724m. This was attributed to a decline in production and the closure of certain plants.
Reports have warned that North Sea sector jobs could fall by 20% “in the coming years” unless investment is funnelled into clean technologies. However, the Government could attract new investment into the North Sea energy sector could support 232,000 jobs as part of the net-zero target for 2050. This would deliver a 66% increase on current levels.
While the specifics of this support aren’t listed, the White Paper goes claim that “the people and communities most affected by the move away from oil and gas production” will be assisted as part of the low-carbon transition. The aforementioned funding for carbon capture and hydrogen are viewed as jobs that those working in fossil fuel sectors could move into.
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