The British government will unveil new measures to ensure energy security later this month, according to a budget document released on March 9th. The measures aim to support the country’s transition to a net-zero carbon economy by addressing concerns over energy supply and reliability.
The announcement comes at a time when the country is grappling with soaring energy prices, supply chain disruptions, and geopolitical tensions. The COVID-19 pandemic has also disrupted energy demand and supply, leading to an uncertain outlook for the sector.
In this context, the government is under pressure to provide a clear roadmap for the energy transition that balances the needs of different stakeholders, including consumers, producers, and investors. The measures are expected to address issues such as pricing, regulation, investment, and innovation.
No incentives for fossil fuel or renewable energy producers
The budget document did not mention any new incentives for oil and gas or renewable energy producers. This has disappointed some industry players who had called for measures such as floor prices for the windfall tax on oil and gas and better investment incentives for renewable power companies.
Oil and gas producers are subject to the Energy Profits Levy (EPL) tax, while renewable power companies are subject to the Electricity Generator Levy (EGL). The industry is keenly watching for any updates on how these taxes might change, as they can impact the competitiveness and profitability of the respective sectors.
Renewable sector concerns: There is no energy security without it
The renewable sector has expressed concern over the government’s recent tax raid on green electricity generators, which they say has made new investment unviable. According to Rod Wood, managing director at wind energy developer Community Wind Power, there is a real possibility that the entire UK onshore wind and solar industry could shut down and move to Europe or the United States.
The sector has been pushing for more support from the government, including increased investment in infrastructure, research and development, and skills training. They argue that renewables are key to achieving net-zero emissions and should be given a level playing field with fossil fuels in terms of policy and funding.
Incentives for nuclear and carbon capture and storage to secure energy security
The budget did include some incentives for nuclear power and carbon capture and storage (CCS) projects. This is in line with the government’s strategy of pursuing a mix of energy sources, including renewables, nuclear, and CCS, to meet its net-zero targets.
Nuclear power and CCS are controversial due to their high costs and safety concerns. However, they are essential for providing baseload power and reducing emissions from fossil fuels. The government has been supporting these technologies through funding, research, and regulatory measures.
Not so green energy security: Coal power back-up for next winter
In addition to the measures in the budget, the National Grid has announced that Britain is considering keeping some coal plants available for backup power to ensure sufficient electricity supplies for next winter. This is in response to the record gas prices and fears of supply issues that have plagued the country this winter.
Under the country’s climate goals, Britain has a target to close its coal-fired power plants by October 2024. However, plant operators such as EDF and Drax are available under contracts with National Grid as part of contingency plans for winter 2022/23.
The government has asked the Electricity System Operator of the National Grid to explore potential contingency contracts for coal plants for 2023/24 winter. However, EDF has already indicated that it plans to close its two remaining coal units at the West Burton A plant on March 31, 2023, citing workforce and operational challenges.