Energy policy will be a key battleground issue ahead of the general election. So, what does today mean in terms of an update on the government’s previous policy like last year’s energy security strategy by Boris Johnson’s Government?
Same, same but slightly different. Some of the things there were expected have not been announced: Rosebank oil and gas field has not been approved, it is expected, however, to clear a key regulatory hurdle today. A decision on hydrogen blending being introduced to the existing gas network has been delayed to later in 2023.
We also have important detail and timelines around future schemes that got backing at the Budget with cleaner timelines for CCS and SMRs deployment. There was also a lot of rehashing of existing spending commitments such as around EV charging infrastructure.
The renewable and green lobby is politically disparate, ranging from activist groups like Greenpeace, wildlife charities like the RSPB and WWF and now businesses like Orsted, Scottish Power and Vattenfall. And as previous governments have found, their day-to-day opposition can make energy policy very awkward. It is worth remembering that today’s announcement comes after the UK Government was ordered by the court to update its Net-Zero Strategy by Friday, following legal action taken by Friends of the Earth, ClientEarth, and the Good Law Project in July 2022.
In the Friends of the Earth’s response, head of policy, Mike Childs, highlighted the insufficient measures for nationwide insulation and the exclusion of onshore wind, warning that his organization would scrutinize the amended strategy to see if a new legal challenge would be worthwhile.
For the wind sector, key regulatory barriers around planning and grid connections remain, while high inflation continues to threaten the financial viability of projects proceeding in the upcoming CfD.
Looking ahead to GE2024
Today’s announcement also helps drive greater clarity on the contrast in messaging the parties will take ahead of the General Election – between a Labour Party’s ambition focused on greening the sector and a Tory policy putting greater emphasis on security and making bills affordable.
The big question is which strategy will protect UK climate leadership. At COP26, the UK painted a picture of itself as a global renewable leader with a thriving climate technology scene. Today much remains the same, but the scale of the US Inflation Reduction Act has completely changed the rules of the game. In response, we are seeing increased action from the EU Net-Zero Industry Act, which we saw Secretary of State for International Trade, Kemi Badenoch, try and keep the UK close to.
The Chancellor, Jeremy Hunt, addressed this challenge in an article in the Times today by saying that the UK would respond not by what he called “massively distortive subsidies”, but through “fantastic science, innovation-rich companies and a pro-growth regulatory regime — powered by private capital from our global financial centre.”
The dividing lines are becoming clearer. Labour plans to bet big on the technology for the future, while the Conservative Party want to retain options, creating markets for solutions to emerge rather than backing a more rigid approach.
This means there are now two key takeaways for business. First, when talking to the Government, there is a need to change the language to reflect this updated positioning around bills and security. With polls demonstrating a lead, Labour engagement remains important, but will require different points of emphasis. And secondly, there is still a huge amount to play with when deciding British energy policy for the decades ahead, so engagement remains important.