New Energy White Paper lays out government plans to transform UK energy system

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The long-awaited Energy White Paper, which sets out specific steps the government will take over the next decade to cut emissions from industry, transport, and buildings by 230 million metric tonnes, has been published today.

Business and Energy Secretary Alok Sharma commented on the announcement: “Today’s plan establishes a decisive and permanent shift away from our dependence on fossil fuels, towards cleaner energy sources that will put our country at the forefront of the global green industrial revolution.

“Through a major programme of investment and reform, we are determined to both decarbonise our economy in the most cost-effective way, while creating new sunrise industries and revitalising our industrial heartlands that will support new green jobs for generations to come.

“At every step of the way, we will place affordability and fairness at the heart of our reforms – unleashing a wave of competition so consumers get the best deals possible on their bills, while protecting the vulnerable and fuel poor with additional financial support.

“With this long-term plan, we are turning climate ambition into climate action – putting the UK firmly on the course to Net Zero to end our contribution to climate change as we build back greener.”

Core parts of the Energy White Paper include:

  1. Supporting up to 220,000 jobs in the next 10 years, including long-term jobs in major infrastructure projects for power generation, carbon capture storage and hydrogen, as well as a major programme of retrofitting homes for improved energy efficiency and clean heat.
  2. Transforming the UK’s energy system from one that was historically based on fossil fuels to ‘one that is fit for a Net Zero economy’, changing how we heat our homes and travel, doubling our electricity use, and harnessing renewable energy supplies.
  3. Keeping bills affordable for consumers by making the energy retail market ‘truly competitive.’ This will include offering people a simple method of switching to a cheaper energy tariff, and testing automatically switching consumers to fairer deals to tackle “loyalty penalties”. A series of consultations will be held in spring 2021 to create the framework to introduce opt-in switching, consider reforms to the current roll-over tariff arrangements, and a call for evidence to begin a strategic dialogue between Government, consumers and industry on affordability and fairness.
  4. Generating emission-free electricity by 2050 with a trajectory that is expected to see the UK have ‘overwhelmingly decarbonised power’ in the 2030s.
  5. Establishing a UK Emissions Trading Scheme (UK ETS) from January 1st 2021 to replace the current EU ETS at the end of the Transition Period.
  6. Continuing to explore a range of financing options for new nuclear with developers including the Regulated Asset Base (RAB) funding model, which could help secure private investment and cost consumers less in the long run. Given the scale of the financing challenge, the government will also consider the potential role of government finance during construction, provided there is ‘clear value for money for consumers and taxpayers.’
  7. Delivering ambitious electricity commitments through the UK commitment to deliver 40GW of offshore wind by 2030, including 1GW of floating wind.
  8. Investing £1 billion in state-of-the-art carbon capture storage in four industrial clusters by 2030. Four low carbon clusters will be set up by 2030, and at least one fully net zero cluster by 2040.
  9. Kick-starting the hydrogen economy by working with industry to aim for 5GW of production by 2030, backed up by a new £240m Net Zero Hydrogen Fund for low carbon hydrogen production.
  10. Investing £1.3 billion to accelerate the rollout of charge points for electric vehicles in homes, streets and on motorways as well as up to £1 billion to support the electrification of cars, including for the mass-production of the batteries needed for electric vehicles.
  11. Supporting the lowest paid with their bills through a £6.7 billion package of measures that could save families in old inefficient homes up to £400. This includes extending the Warm Home Discount Scheme to 2026 to cover an extra three quarters of a million households and giving eligible households £150 off their electricity bills each winter. The £2 billion Green Homes Grant announced by the Chancellor has been extended for a further year in the Ten Point Plan.
  12. Moving away from fossil fuel boilers. By the mid-2030s, the government expects all newly installed heating systems to be low carbon or to be appliances that the government is confident can be converted to a clean fuel supply.
  13. Supporting North Sea oil and gas transition for the people and communities most affected by the move away from oil and gas production, ensuring that the expertise of the oil and gas sector be drawn on in developing carbon capture and storage and hydrogen production to provide new green jobs.

The arrival of the long-awaited White Paper has been welcomed across the industry.

Emma Pinchbeck, Chief Executive at Energy UK, commented: “Today’s White Paper reveals the scale and opportunity of the energy transition, with aims in it to at least double the amount of clean electricity produced today, start making our homes warmer and greener, and help the switch to electric vehicles.

“The energy industry will do our bit to innovate, supporting our customers so that they benefit from the Net Zero transition and investing in the green infrastructure we need – but clear policies from Government help us do that.

“This is what the White Paper – and other publications over the next year – should provide.”

Hugh McNeal, Chief Executive at Renewable UK, added: “Today’s white paper provides greater clarity to the companies investing across the UK to deliver our net zero emissions target.

“Wind and renewable energy will be at the centre of our future energy system, providing the clean electricity and green hydrogen we need to decarbonise our economy.

“The next generation of onshore and offshore wind farms will bring tens of billions of pounds of investment to support a green recovery and create thousands of jobs across the country as we transition away from fossil fuels.

“To meet the goals set out in the white paper, it’s clear that we have to double-down on renewables as the main source of energy for our homes, transport and industry.”

Gareth Miller, CEO of Cornwall Insight, also commented: “The Energy White Paper maps out the biggest change to the energy markets since the Electricity Act of 1989.

“Many of the headlines will focus on policy for investment, and carbon pricing with plenty in that builds on the 10-point plan and National Infrastructure Strategy.

“The most high-profile addition is the commitment to reach financial close on at least one more large nuclear project during this Parliament, and the announcement surrounding a UK Emissions Trading Scheme.

“But the White Paper signals a readiness to change the underlying architecture of the sector, including the relationship between the sector and consumers, that really distinguishes it from what has come before.

“The documents focus on a just distribution of costs of the transition and its consistent thread on whether the system hangs together in a fashion that really works against today’s objectives are as welcome as they are necessary.

“There is a lot of detail to be assimilated before we can really judge if the White Paper has the makings of a coherent strategy, or how it will impact different players across the value chain.

“We will be setting out our thoughts on this over the next days, weeks and months as the timetable of releases, calls for evidence and consultations unfold.

“But the government should at least be commended for recognising that going ‘net zero’ demands more than just skin-deep reforms or introductions of new policy levers.

“By firing the starting gun today, at the end of 2021 once the music of consultations ends, it is possible that we could see a range of new proposals that will really shake-up the traditional structures of the market.

“One thing is very clear; anyone who thought that a shift to net zero would be by incremental change may have to redefine their perspective.”

Alongside the Energy White Paper, the government has also confirmed that it is to enter negotiations with EDF in relation to the Sizewell C project in Suffolk as it considers options to enable investment in at least one nuclear power station by the end of this Parliament.

This is the next step in considering the Sizewell C project, and negotiations will be subject to reaching a value for money deal and all other relevant approvals, before any final decision is taken on whether to proceed.

The Energy White Paper can be read on the government website.