On 18 December 2020, the government issued a white paper on energy reform, which marked the third substantial green infrastructure announcement made by the government in almost as many weeks. On 18 November 2020, the Prime Minister had unveiled his ten-point plan for a so-called "green industrial revolution" which laid the foundations for the white paper, announcing amongst other things:
- plans to make the City of London the global centre for green finance;
- the creation of up to 250,000 highly skilled green jobs;
- a quadrupling of offshore wind electricity generation capacity by 2030;
- the increasing of hydrogen production capacity;
- plans to make homes, schools and hospitals greener; and
- the establishment early-stage carbon capture and storage in two different clusters by the mid-2020s, with two further clusters by 2030.
A week later, on 25 November 2020, the Chancellor of the Exchequer unveiled his spending review. In his speech, the Chancellor emphasised the need for a green recovery from the COVID-19 pandemic and also stressed the need to "level up" the country, committing to increase national infrastructure spending in the north.
The white paper contains a number of exciting proposals, which are intended to entirely reshape British industry and the economy.
To decarbonise the UK's energy supplies, the government considers that the UK will need renewable and low-carbon electricity generation, and also low-carbon hydrogen production. The UK is aiming for 5 gigawatts (GW) of low-carbon hydrogen production capacity by 2030, which is a very substantial increase on current production levels.
In addition to powering fleet transport such as heavy-goods vehicles and buses until they are capable of being electrified, the white paper envisages hydrogen being used for domestic and industrial heating, as a replacement for natural gas. Hydrogen as a heating source will need extensive trials and research, as the white paper acknowledges, but the government is committed to launching trials from 2023 and hopes to scale-up to a "hydrogen village" by 2025 and a "hydrogen town" by the late 2020s.
Existing boilers for heating will need conversion, and new boilers, cookers, and fires may need to be manufactured in order to meet these deadlines. In addition, the existing gas network will need an upgrade. The government will be establishing and funding a net-zero hydrogen fund to support the nascent hydrogen production industry, which will provide £240 million of capital co-investment.
Offshore wind power has been a phenomenal success and substantial capacity has been permitted and constructed in the UK in recent years. While greenhouse gas emissions associated with electricity generation have been reduced by over 70% since 1990, there is still much more to be done. Perhaps one of the most headline-grabbing aspects of the white paper is the ambition to quadruple offshore wind capacity by 2030, just nine years away, which would take the UK to approximately 40GW on installed capacity, 1GW of which might be floating. This growth is all the more dramatic when compared to the fact that there was only 1GW of installed capacity in 2010.
In addition to the clean power that will be produced, it is clear that the government sees this as an opportunity to increase supply chain jobs, entice manufacturers to invest in innovation and bring growth to the UK's ports and coastal regions. The white paper is targeting the annual export of offshore wind-related goods and services of £2.6 billion annually by 2030: building back greener is big business.
The white paper recognises the need to continue to support renewable energy developers and the contracts for difference (CFD) auctions will continue for offshore and onshore wind, as well as solar power. The government has, however, launched a call for evidence seeking views on how the CFD scheme could evolve beyond the 2021 auction in order to increase renewables capacity.
Carbon capture and storage
The government has, for some time, touted carbon capture and storage (CCS) as a key part of its net-zero commitments, recognising that not all greenhouse gas emissions can be eliminated, and at least not by 2050, such as long-haul aviation emissions. The white paper describes the government's ambition to capture 10 million metric tons of carbon dioxide a year by 2030, which is the equivalent to the tailpipe emissions from four million passenger cars. To achieve this ambitious target, the government has announced that it will be investing up to £1 billion to support the establishment of CCS plants in four different clusters. This is likely to include a revenue mechanism to bring forward private sector investment into industrial carbon capture and hydrogen projects, however, further detail will be announced later in 2021.
The white paper promotes a role for nuclear power as part of the low carbon economy. While it nods to large-scale nuclear projects, noting that the government aims to bring forward at least one large-scale nuclear project subject to establishing clear value for money for consumers and taxpayers, and obtaining all approvals, its focus is instead on small modular reactors (SMR) and advanced modular reactors (AMR).
The government is proposing to establish a £385 million advanced nuclear fund in order to develop an SMR design and to build an AMR as a demonstration project by the early 2030s. Like many of the other technologies mentioned in the white paper, the government has clearly seen an opportunity to seed fund early-stage industries in order to unlock private-sector matched funding and to establish the UK as a hub for green-tech innovation. The white paper notes that SMRs have the potential to provide cost-competitive nuclear power as early as the 2030s.
Transport and electric vehicles
In November 2020, the government announced that it will ban the sale of new petrol and diesel-fuelled cars in the UK from 2030, which is likely to create a rapid rise in the sale of electric vehicles (EVs) in the near future. The white paper recognises the need for reliable and widespread supporting infrastructure and it pledges £1.3 billion to accelerate the rollout of charge points for EVs in homes, workplaces, streets and on motorways across England. A £562 million fund will be made available for grants to incentivise buyers to make the switch to EVs.
Hundreds of millions of pounds will be spent in the next four years developing gigafactories producing EV batteries and other strategic technologies. The government clearly has an eye on supporting the establishment of a comprehensive supply chain, in light of the fact that 10% of EVs currently bought in Europe are built in the UK.
In June 2019, the UK became the first country in the world to commit to net-zero emissions by 2050. However, the government has not released much information since then and others have taken the lead in describing the steps needed to hit that target, most notably the European Commission's announcement of its European green deal in December 2019. Having got off to a slow start, although admittedly Brexit and the COVID-19 pandemic have required a lot of political attention, the government has now set out some clear indicators of the industries that it will be supporting and the measures which it will adopt to promote them. Industry leaders, including investors and funders that thrive on regulatory certainty, will relish the opportunities outlined in the white paper. With the UK hosting the COP26 climate conference in November 2021, it is certain that developing green infrastructure and ensuring the establishment of new green industries will be a major focus.
The white paper contains ambitious plans offering support for a variety of technologies and committing funds to support the growth of low-carbon green technologies. In addition, the white paper sets out other steps to drive forward the government's overall policy aims, such as the government's plans to review the existing national policy statements, which are used to determine applications for development consent for infrastructure projects.
It is clear that a number of government departments will need to work together in order to achieve the aims of the white paper and hit the net-zero emissions goal by 2050. Not all of the policy measures will succeed, but the ambition is clear, and exciting, to see.
Read the white paper in full
This article was published in Thomson Reuters Practical Law Magazine (January/February 2021).