The government has launched its long-awaited Energy White Paper, expanding on the government’s 10-point plan for a Green Industrial Revolution.
The Energy White Paper commits to the creation and support of up to 220,000 jobs over the next decade, ranging from jobs in major power generation, carbon capture storage and hydrogen projects supported by a new £240 million net zero Hydrogen Fund, to the retrofit of homes and buildings for greater energy efficiency.
New UK Emissions Trading Scheme
The set-up of a UK Emissions Trading Scheme (UK ETS) from 1 January 2021 is also proclaimed to be the "world's first" net zero carbon cap-and-trade market when it replaces the EU's current ETS at the end of the Brexit transition period. The cap on CO2 emissions within the market will be reduced by 5%, "giving industry the certainty it needs to invest in low carbon technologies". Further consultation over how to align the new ETS with the UK's 2050 net zero goal is expected to follow, but meanwhile practically speaking, businesses have less than two weeks to prepare for the overhaul of emissions regulations. The government insists that the technical system underpinning the scheme is in its final stages of development and is on track to be ready in time.
Shifting to green electricity
The White Paper promises an overhaul of the entire energy system, electrifying transport using largely renewable generation and bolstering renewable energy supply, committing to achieving the ambition of an “overwhelmingly decarbonised” energy system by 2030, eventually getting to the point of all electricity being emission-free by 2050. To help achieve this goal, the White Paper reaffirms the commitment to deliver 40GW of offshore wind by 2030 - enough to power every home in the country.
This is matched by measures, which are to be trialled, to keep the energy retail market “truly competitive” through simpler methods of switching to cheaper energy tariffs and tackling “loyalty penalties” by automatically switching consumers to cheaper deals.
Financing options for new nuclear
The plan also commits to exploring financing options for new-build nuclear energy projects as well as the establishment of a £385m Advanced Nuclear Fund to support the development of Small Modular Reactors and research into more advanced nuclear technologies such as fusion.
There are 15 reactors in Britain at present, generating 21% of the country’s electricity. However, almost half this capacity will be retired by 2025 and all but one will be offline by the mid-2030s. If the government’s green aspirations as set out in the Prime Minister’s 10-point plan are to be met then new nuclear plants will be essential to replace this lost capacity.
These finance options could well include the Regulated Asset Base (RAB) funding model, which could help secure private investment and save consumers money long-term. The White Paper also suggests that the government will “consider the potential role of government finance during construction, provided there is clear value for money for consumers and taxpayers”.
Arguably the real impetus behind the potential adoption of the RAB model ‘as standard’ in new nuclear stems from collapse of the £20bn Wylfa Newydd nuclear power station project when Hitachi suspended construction due to financing issues and the stalling of the £15bn Moorside nuclear plant in Cumbria after Toshiba called a halt when it was unable to find a buyer.
The government also confirmed it was entering into negotiations with EDF over proposals to build a major nuclear power station at Sizewell in Suffolk, which would follow EDF’s Hinkley Point C project currently under construction in Somerset. The talks are a step towards potentially giving the project the green light, although the government stressed a final decision would be subject to reaching "a value for money deal and all other relevant approvals”.
Some have questioned whether a ‘no deal’ Brexit would have any impact on these projects in particular and government plans in general. One possible implication of course could very well be that UK state aid rules in a ‘no deal’ scenario would actually make developments such as these easier and more commercially attractive for developers. Judging the impact (if any) Brexit may have will only be possible when negotiations with the EU have concluded – whatever their outcome.