23
May
2024

Order, order: Energy pledges in the spotlight as UK prepares for general election

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  • Next UK general election will take place on 4 July, with Labour polling ahead of Conservatives
  • UK energy sector questions value and role of Labour’s proposed national clean energy firm
  • Conservatives appear to have lost sight of the transition according to industry commentators
  • Calls growing for parties to focus on efforts to improve and speed up the energy transition

From the perspective of energy sector stakeholders, the onus for progressing the energy transition is on policymakers, and with a bumper election year for many major global economies in 2024, energy policy is likely to face some radical challenges and changes.

The UK is particularly noteworthy, having spent the last 14 years under a Conservative government, via a veritable smorgasbord of prime ministers. With the next UK general election now scheduled for 4 July, recent opinion polls indicate a shift to Labour is highly likely: in YouGov’s 15-16 May poll, the Keir Starmer-led party polled at 47%, well ahead of the Conservatives’ 20%.

Energy policy is set to be high on the agenda for all parties, as many questions within the UK’s energy sector remain unanswered, particularly around the future of gas infrastructure and the potential for hydrogen to heating.

Political divide

In February, shadow energy secretary Ed Miliband told attendees of the Energy Institute’s International Energy Week (IEW) event that the UK becoming a clean energy superpower was one of the top priorities of the Labour party. The party is seemingly optimistic about the country’s energy transition, and bullish on a 2030 target of 100% clean power, which is five years ahead of the Conservatives’ current 2035 goal. However, it is easier to be optimistic and passionate about the transition as an opposition party.

Meanwhile, the government, with Rishi Sunak serving as prime minister since October 2022, has felt the painful nuances and complexities of the energy transition first hand in recent years, particularly the consumer cost of the process. The trouble with an election year is that political parties can flip-flip on previous policies to appease voters. Industry stakeholders are insisting that energy should not be politicised, but the transition is likely to be a key focus for all parties in the general election.

“The fact that we’re all going have to pay more for electricity is something which politicians I think scandalously have skated over the top of,” says one UK policy lawyer, speaking to Gas Matters. “What you end up with is a retreat from the high watermark of energy policy.”

He alludes to the Conservatives’ retreat from the Ultra Low Emissions Zone (ULEZ) policy in Greater London during the Uxbridge and South Ruislip by-election in July 2023. The policy was first coined by former Conservative London mayor and exiting MP for the constituency Boris Johnson, who served as prime minister between July 2019 and September 2022, winning a landslide victory for his party in December 2019 with a majority of 80 seats.

During the by-election campaign, Conservative candidate Steve Tuckwell had rallied against the expansion of ULEZ to include Greater London. In his winning speech, Tuckwell took a shot at Labour, noting that ULEZ was a “damaging and costly policy.” There are various examples of the Conservatives dismissing the transition in recent months, and the policy lawyer is critical of the party’s efforts while in power. “I’ve been pretty scathing of the Conservatives’ record in power the last five years,” the source notes.

In a blog post published after the Uxbridge by-election, the lawyer suggested the Conservative party was creating a political divide between the parties by highlighting the cost-of-living crisis as a factor in the energy transition.

Calls are growing for parties to instead focus on efforts to improve and speed up the transition, including ways to support the hydrocarbon sectors in their decarbonisation efforts. One source from a leading UK energy and utility firm notes there has yet to be a constructive conversation about what could be done with the aging gas distribution network.

“I think the main reason it’s not been properly explored is this hope that there might be hydrogen running through those pipes,” they say. “The government has said it’ll make a decision on hydrogen for heating in 2026. While that’s still on the table, people are holding back from full scale investment in heat pumps.”

In his IEW speech, Miliband said of the UK’s oil and gas business: “It’s vital we have a managed transition in your sector, with security for workers. And so, we can use this corporate infrastructure for our transition.” However, he did not divulge any further detail around what this might look like.

Miliband did set out a handful of key energy priorities for Labour, including establishing a nationalised clean energy business dubbed GB Energy, which he said would “invest in leading edge technologies like floating wind and small modular reactors in partnership with the private sector.” This is meant to assist with crowding in up to hundreds of billions of pounds in private investment, he said. A Labour government will provide an initial GBP 8.3 billion (USD 10.56 billion) capitalisation over the course of the first parliament.

The future of GB Energy

As in any other sector, the concept of a nationalised energy solution can be polarising, and the industry so far appears to be skeptical of GB Energy’s overall role. Addressing the uncertainty, Miliband told UK parliament publication The House that GB Energy would in fact act as a driving investor in new technologies via private sector partnerships, and “as a way of giving communities a stake and ownership in renewable energy via partnerships with local authorities and the private sector.”

“I think there’s been a huge amount of ambiguity around [GB Energy],” the UK energy firm source says. “I think they’ve talked a bit about some aspirations to be a Vattenfall [Sweden’s national energy player] kind of business, but I suspect they are mainly eyeing up the returns made by the state [in that instance]. When that makes contact with reality, I think it’ll probably fall away because there just isn’t a need for the state to get involved in, for example, offshore wind, other than by providing a stable market framework,” they add.

The policy lawyer also compares the move to France’s nationalisation of EDF in October 2022 as a response to Russia’s invasion of Ukraine and the subsequent breakdown of Europe’s energy security.

At the time, the French government said the move would enable the energy firm “to commit to long-term projects that are sometimes incompatible with the shorter-term expectations of private investors, without being exposed to the volatility of equity markets.”

The company has since posted positive profits of EUR 10 billion (USD 10.85 billion) for 2023, compared to a net loss of EUR 18 billion in 2022.

“From the private sector perspective, [GB Energy] is massively market distorting,” the source comments. “This is government interference in what should be a natural energy market where the law of supply and demand will set the price,” he adds.

Ben Shafran, head of markets, policy and regulation at policy consultancy ES Catapult agrees, adding, “being an innovation agency, we’re obviously going to be on the side of leaving it to market players and innovators.”

But a government-powered energy entity could serve to aid the hydrocarbons industry in its phaseout, the UK energy firm contact says: “Setting up a strategic reserve or helping the industry gain investment in long-duration energy storage is another application for GB Energy.”

“There could also be a huge role for GB Energy to derisk hydrogen to power, so storing green hydrogen for a year or two years, and having that strategic reserve would allow the rest of us just to get on with electrifying the 95% of the rest of the system that we already have all the solutions for,” they continue.

Trade unions are also expected to play a key role in GB Energy, but Miliband has not explained exactly how. Shafran says GB Energy could help fill the current gap in local expertise around how councils in the UK can speed up their transitional efforts. “A body like GB Energy could help fill a gap by being a source of expertise between the commercial world and the needs of public bodies,” he says.

The ambiguity around the entity’s final form has raised more questions than Miliband has provided answers for, and the industry appears skeptical of its benefit. But Shafran is optimistic about Labour’s “clean energy by 2030” pledge, which sets the target five years ahead of the Conservatives’.

“[Miliband has said] by having that clear polestar [clean by 2030 target], you’ve got all government departments with a single focused vision and ideally the private sector as well,” Shafran relays.

“In a way it almost doesn’t matter whether 2030 is achievable. It really matters if you’re getting genuine momentum and progress towards the aim. There is some merit to lighting a fire under that,” he says.

A fully clean energy sector by 2030 is technically achievable, says the energy firm contact. “But it requires real concerted efforts,” they add, insisting it is impossible to achieve without locational pricing and market reform. “Ed Miliband recently was a bit evasive on zonal pricing – he’s definitely not committed to it. To the extent that that continues, that could put that 2030 target in jeopardy,” they warn.

Power shift

The energy landscape in the UK has changed dramatically in 14 years of Tory rule. In 2010, the year when the Conservatives, led by a then 43-year-old David Cameron, ousted Labour from Number 10, the country relied on fossil fuels for 76% of its electricity generation, with natural gas at 47.7% and coal at nearly 30%, followed by nuclear at 18% and wind at just 1.4%. By 2023, wind and solar had a combined 33.5% share in the power mix, with gas at 31.2% and coal at just under 1%.

This major shift in the UK’s power mix is reflected in the country’s greenhouse gas (GHG) emissions, which fell from 611.5 mt CO2e in 2010 to 406.2 mt CO2e by 2022 – a 50% decrease from 1990 levels. This halving in emissions is often cited by the Conservatives as concrete evidence of the party’s leadership in clean energy, harking back to Cameron’s “vote blue, go green” pledge of the mid-2000s. Crucially, half of the reduction has taken place since 2010, while the shift away from coal has not involved a switch to other fossil fuels, climate think tank Ember highlighted in a 2023 report.

But 14 years is an eon in politics and the Tory new guard has often expressed its support for a watering down of the UK’s climate ambitions, while Prime Minister Sunak insists on pragmatisminterpreted by some as a desire to slow down the country’s energy transition. At the same time, the halving in the UK’s emissions since 1990 is in part due to the decline of UK industry, which has led to a 26.5% fall in industrial emissions between 2010-22 – down 63.3% from 1990 – but also the loss of almost 200,000 manufacturing jobs, a 6.7% drop, during that same period, trade union GMB said last year.

Conservative criticism

At IEW, Miliband said Labour’s 2030 aim would mean doubling onshore wind, trebling solar power and quadrupling offshore wind, with support from nuclear power and backup dispatchable electricity through gas with carbon capture and storage (CCS), hydrogen and battery storage, alongside more flexible demand.

Miliband called out the current administration for its de facto ban on onshore wind in the UK, via planning rules that have stifled the business. After the government overturned the ban in September 2023, reports in December 2024 said no new submissions for onshore wind had been made.

Industry commentators have also been critical of the Conservative energy policies. The policy lawyer hits out at what he says is a hydrogen plan “that has gotten stuck.”

“There’s no energy market mechanism model for pricing hydrogen into the market. They haven’t made up their minds on whether hydrogen is going to be used for domestic heating or only for industrial processes,” he laments.

Shafran highlights the drawn-out review of electricity markets, which was launched two years ago. “At the time it gave the impression it could quickly address some issues. Energy market reform is never quick and easy, but two years in we’re still consulting on options,” he explains.

Meanwhile, Bloomberg reported on 10 May that the UK government has delayed support for some carbon capture, utilisation and storage (CCUS) projects until after 2024 as costs rise. The first major stage of its CCUS plans could be smaller than previously expected, with some projects potentially delayed, people familiar with the matter told Bloomberg.

On 10 May, a spokesperson for the UK’s Department for Energy Security and Net Zero would not comment directly on the report, but told Gas Matters Today: “This government is committed to CCUS, and we are progressing at pace. Our ambition remains to take the first of our final investment decisions this year.”

It is clear there is major uncertainty across both the two leading parties’ pledged policies, and the upcoming European parliamentary election in June is sure to create even more doubt around the continent’s energy transition, including post-Brexit UK. But the UK general election could also present an opportunity for energy to become a top priority for whoever ultimately wins. - NM

Contact the editor:

Kostya Tsolakis
[email protected]

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