Why UK energy needs an ‘everything’ strategy after Russia’s war

Call it the everything strategy. The UK is working up a new energy plan, prompted by Russia’s invasion of Ukraine and soaring oil and gas prices, that seems likely to include just about everything.

That’s no bad thing. Discussions of energy and the net zero transition are fraught, even among believers: try mediating between the evangelists of hydrogen versus heat pumps.

But the subject is reaching culture war status in British discourse, fuelled notably by loud sceptics of the UK’s net zero target struggling to maintain their zeitgeisty relevance in the post-Brexit age.

There should be some sensible middle ground. There are those arguing that we need considerable amounts of gas in particular for decades and that we now care about where it comes from. And there are those who argue that the best investment in our future energy security is in more cheap renewables and energy efficiency. Both are correct.

There is dirty work to do. That could mean extending the life of coal-fired power plants due to close, simply to get through next winter. The attitude to the North Sea, where investment in 2020 sank to the lowest real-terms level in nearly 50 years, has also changed. New licensing, though, doesn’t yield quick results. Near-term uplift is limited: Norway’s plans to boost output from existing fields this year amount to 1 per cent of annual production. But industry group OEUK said last year that less than a third of the potential investment in project plans for 2021-25 had been fully committed by companies, money that could be unlocked by a changed political climate.

This isn’t just about replacing Russian gas, which currently accounts for 4 per cent of UK needs. (Or indeed lower prices, which are set in international markets).

Twice weekly newsletter

Energy is the world’s indispensable business and Energy Source is its newsletter. Every Tuesday and Thursday, direct to your inbox, Energy Source brings you essential news, forward-thinking analysis and insider intelligence. Sign up here.

It’s about addressing growing dependence on imports, which has left the UK increasingly reliant on the expensive spot LNG market. National Grid’s various net zero scenarios assume gas is used in electricity generation for most of this decade and in heating well into the next, notes energy analyst Peter Atherton.

The thing producing most heat in the debate is unlikely to generate much in homes: fracking. The government isn’t inclined to lift the ban. But throwing a bone to advocates on research would be suitably irrelevant. Bullish forecasts are often based on out of date geological surveys: a 2019 estimate for gas in the Bowland-Hodder area cut previous figures by 90 per cent. The public is against fracking: those opposing it outnumbered supporters by 2.5 to 1 in a government survey. So are, crucially, many MPs.

Political capital can be better deployed elsewhere. To avoid obvious backsliding on statutory net zero goals, the green side of the strategy needs to be all-encompassing.

The UK has a chequered history on new nuclear, which is generally acknowledged to be expensive, risky but necessary. The existing target for 40GW of offshore wind could be raised but is ambitious and requires overhauling the planning and approvals process.

Quicker wins come in two areas: solar and onshore wind, which has been iced in England for years, and energy efficiency, marred by repeated policy failures over the past decade.

The government could lift the 5GW cap on solar and onshore wind in the coming auction round, says Simon Evans at Carbon Brief, with over 600 projects with planning permission sat in the pipeline. After the wilderness years, there would still need to be a controversial push on planning consents to tackle local opposition to large projects — such as Matt Hancock’s odd suggestion that a West Suffolk solar farm would “pump out” more carbon than it saved.

Efficiency can no longer be the poor relation. For a start, high prices improve the economics (or savings to households) of work done. Upgrading the efficiency of 1mn homes annually cuts UK’s gas demand by 0.45 per cent each year, according to the Energy and Climate Intelligence Unit, an eminently achievable target. Add heat pump installation in line with government plans and over 10 years gas saved amounts to a quarter of current household demand and a tenth of UK usage overall.

The everything strategy presents a challenge for the Treasury, needing funding notably for a proper efficiency drive and (inevitably) more help to low-income households squeezed by higher energy bills. But it is the best hope for the beginnings of a consensus that cuts across concerns of security, climate and affordability.

Climate Capital

Where climate change meets business, markets and politics. Explore the FT’s coverage here.

Are you curious about the FT’s environmental sustainability commitments? Find out more about our science-based targets here

Source: Financial Times