Gareth Miller, CEO at Cornwall Insight said:
“The Energy Security Strategy is a very political document that raises as many questions as it answers. There are clear favourites and as much can be read in to what is in the Strategy as what is not. 15 months on from the Powering Our Net Zero Future White Paper, the Strategy’s strong pushes for offshore wind, nuclear power and both green and blue hydrogen show a much stronger commitment to making the UK more energy self-sufficient, while continuing the Paper’s path to net zero.
“But the Strategy struggles to address what many will see as the two immediate challenges: reducing energy dependence on fossil fuel imports and helping consumers deal with sky-rocketing energy bills. Furthermore, it is unclear what the balance for consumers will really be once all costs, investments and returns from initiatives begun today are properly assessed. In an environment of higher costs in the next few years anyway, that near-term cost uncertainty is concerning.
“The government’s shift in focus towards more ambitious nuclear plans were well trailed. Many in the energy industry have long called for a greater commitment to nuclear power. However, the scale and speed assumed for negotiating terms, raising finance – taking three projects to final investment decision in this Parliament and the next – are very ambitious, and it is notable that they remain qualified by reference to value for money. Similar caveats are slotted in around hydrogen too.
“The acceleration plans for build out of nuclear are also very ambitious. Given history, there is scepticism that projects just won’t be delivered to time and budget. The new financing mechanism, the Regulated Asset Base model RAB, sees those risks shared with consumers. This important change should be analysed and transparently debated so consumers get a better sense of the possible range of bill impacts.”
“Meanwhile, the roles for onshore wind and solar seem to be pared back from earlier indications. Onshore wind gets very little look in, although the intention to look at arrangements for repowering sites is over-due and could help lift both capacity and efficiency if got right. The detail however is lacking.
“The strategy increases the already ambitious offshore wind targets, taking the UK from the White Paper’s 40GW to 50GW by 2030. Given the increase in power consumption expected over the next few years and our need to stabilise the country from future external energy supply shocks, the emphasis on large scale indigenous low carbon power is understandable. Offshore wind is a UK success story and has a lot more to offer. But this ambition will involve a significant ramp up in the supply-chain, consenting and approval process compared to what has ever delivered before. In addition, network investment and planning, market reform as well as expansion of energy storage will all be required. All of that enabling infrastructure and catalysts will take mobilisation.
“Generally, therefore, there are sound reasons to believe that there could be additional costs and complexities attached to today’s plan in the near term that are yet to be fully exposed and cannot be adequately unpacked.
“The strategy is also marred by stark omissions. The security of our energy system is more than purely supply and its disappointing attempts to reduce energy consumption do not feature in any meaningful way. The absence of any measures on energy efficiency such as housing insultation are a missed opportunity, they are no more costly than other plans that have been announced and, in many cases, less so. We would urge a rethink of the exclusion of demand side energy policy.
“Despite being one of the most spoken about areas of the energy crisis, the strategy does little to address the current energy cost concerns of domestic and business consumers. Our forecasts suggest bills are rising and there are no guarantees prices will fall anytime soon. While the strategy may have a positive impact on energy prices years down the line, this will be of little consolation to the many businesses facing real pressure due to ever increasing energy prices, or the households having to make the difficult and unenviable choice between eating and heating.
“Ultimately, this strategy could be construed as one that delivers qualified long-term solutions to near-term and unequivocal problems. While it is clear that moves towards low-carbon energy sources and a focus on net zero should be paramount, that was the case before war in Ukraine. Many of the levers the strategy looks to pull are the same as previous policy documents, just with a different ambition and timetable, and -like previous policy documents – almost all having an effect well into the 2030s.
“Many had expected something new that would bring forward less energy dependence on imported fossil fuels, as well as address the cost arising in the market for bill payers today. By announcing a strategy that doesn’t really deliver against these outcomes, which indulges in future-gazing, and which shuts out some fairly obvious levers that could make a positive impact, the danger is that in the coming cost of living and possible energy supply squeeze people will lose confidence in the adequacy of government policy to deliver secure and low carbon energy in an affordable way.
We thought before the strategy that come winter more may have to be done by government on this agenda. We still think that’s the case.”
–Ends
Notes to Editors
For more information, please contact: Verity Sinclair at v.sinclair@cornwall-insight.com
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About the Cornwall Insight Group
Cornwall Insight is the pre-eminent provider of research, analysis, consulting and training to businesses and stakeholders engaged in the Australian, Great British, and Irish energy markets. To support our customers, we leverage a powerful combination of analytical capability, a detailed appreciation of regulation codes and policy frameworks, and a practical understanding of how markets function.
