What does the Strategy Say?
The UK has published its much-heralded Energy Security Strategy. It was promised in the immediate aftermath of the Russian invasion of Ukraine, then delayed when the complexities of energy and politics became apparent. Will the resulting strategy help to make the UK's energy supply more secure?
The UK did not rely much on Russian energy in the first place. As the introduction to the Strategy makes clear, it's Russia's ability to increase gas prices for UK consumers by restricting supply, which affects the UK's energy security. While it is UK Government policy to end the UK's reliance on Russian energy completely, it is achieving this objective without any of the measures described in the Strategy. The aim of the Strategy therefore appears to be to reduce the UK's exposure to price spikes in world energy prices – although it does not say this explicitly.
The effect of the existing Net Zero strategy will be to reduce reliance on fossil fuels, which should in turn reduce the UK consumers' exposure to energy price spikes, albeit only over the long-term. The measures introduced by the Energy Security Strategy will result only in relatively small changes to the Net Zero strategy – increasing the target contribution of nuclear to the UK energy mix to 24% by 2050, offshore wind from 40GW to 50GW by 2030, and increases in solar and hydrogen production targets, alongside a new oil and gas licensing round.
Nuclear Ambitions
The most eye-catching change in the Strategy is the increase in the target for nuclear capacity. It promises the approval of one nuclear plant this Parliament and two in the next Parliament, resulting in the approval of three by 2030. Assuming an average capacity of 3GW, and taking the build time of nuclear into account, this would result in new nuclear capacity of around 6GW by 2035 and 12GW by 2040. By then, offshore wind by contrast will have a capacity exceeding 50GW, and onshore wind and solar will also be far ahead of nuclear. Nuclear can make a contribution certainly, but not transformative, and not enough to keep the lights on.
The Strategy says that nuclear will provide 'baseload' power, making the case that baseload power is vital to the functioning of the electricity system: "We can only secure a big enough baseload of reliable power for our island by drawing on nuclear." It is time to retire the phrase 'baseload'. It refers to the electricity system the UK used to have, consisting of baseload and peaking plants, the latter designed to meet peaks in demand. Baseload does not keep the light on, and never has, yet the term is still often used to justify investment in technologies like nuclear. In a system dominated by renewables, baseload power has limited usefulness. If renewables dominate, electricity production will vary constantly. What is required is electricity production plant that can vary supply to balance the changing level of renewables output, often called dispatchable power. This is the role currently played by gas generation, and it is substantial – in 2019, the UK sourced 40.9% of its electricity supply from gas generation.
The Need for Dispatchable Power
If nuclear energy could provide turn up, turn down power in a matter of seconds, additional nuclear could be transformative. Currently, it can't. Even taking into account the revised nuclear targets, the UK will generate much more power from wind and solar than it will from nuclear. If nuclear cannot provide dispatchable power, another technology will be needed to perform this role. It will be this technology, not nuclear, that will be crucial in decarbonising the electricity supply. The UK's Net Zero strategy (and this does not appear to have been changed in the Energy Security Strategy) relies on carbon capture and storage (CCS) to provide the bulk of dispatchable power in the near term, with other emerging technologies (long duration storage/hydrogen) to provide increasing roles over the longer term.
The issue that Russia's invasion of Ukraine highlights – and about which the Energy Security Strategy has little to say – is that CCS relies on natural gas, and therefore that the UK's current Net Zero strategy will see the UK rely on natural gas for decades to come. Capturing and storing the carbon emitted by gas generation may help achieve the UK's climate goals, but it won't help the UK reduce its reliance on international gas markets.
The Energy Security Strategy seeks to address this by proposing a new oil and gas licencing round for the North Sea, in order to increase UK production, thereby it says addressing "our underlying vulnerability to international oil and gas prices by reducing our dependence on imported oil and gas". Yet this statement is contradicted by an earlier statement (only three paragraphs earlier) in the Strategy: "As we are part of a global market, the price we pay for gas is set internationally." Of course, in free markets, the latter of these two statements is the correct one.
The point is not that new and oil gas production is necessarily the wrong policy response (it might help neighbour countries reduce reliance on Russian gas), it is that increasing the UK's production will not affect global gas prices. In other words, if the UK wants to reduce consumer exposure to international gas prices, the solution is to reduce reliance on gas, not just imported gas. And this can be done only by advancing plans for zero carbon dispatchable power.
Green Hydrogen "Superfuel"
The Prime Minister's forward to the Energy Strategy identifies the potential solution: "We’re going to produce vastly more hydrogen, which is easy to store, ready to go whenever we need it, and is a low carbon superfuel of the future." Yet the Strategy itself sets out a more modest ambition – increasing the 2030 target for hydrogen production from 5GW to 10GW.
Better than nothing certainly but the Strategy could have gone further, both in terms of the level of the target and the nature of the hydrogen production. Low carbon hydrogen production can be blue or green - blue is produced from natural gas using CCS, while green, or electrolytic, hydrogen is produced from electricity not reliant on gas. If the UK is to reduce reliance on natural gas, then the development of green hydrogen should be the priority.
It is possible to envision an energy system of the future which relies predominantly on renewables, with hydrogen providing the bulk of the zero carbon dispatchable power required to balance renewables. This is not to say that other technologies should not be included in the mix, such as bioenergy and pumped storage hydro, but only hydrogen offers the scale required to balance renewables output.
Implementing this vision would reduce the UK's reliance on gas, and reduce consumer exposure to international gas prices. To implement it, the UK would need to accelerate the UK's current plans for green hydrogen production. The Energy Security Strategy takes some tentative steps in this direction by increasing the 2030 target for green hydrogen production to 5GW. Yet the UK could go further.
First, UK policy is currently agnostic between blue and green hydrogen. Some blue hydrogen makes sense, yet the UK could set out a long-term vision where green hydrogen predominates. Second, the UK could set out 2035 and 2040 targets, together with a programme of CfD backed auctions. This would create the market conditions to enable a UK green hydrogen industry to scale up and reduce the cost of hydrogen production in a manner similar to that witnessed in the offshore wind sector. As well as supporting the UK energy system, export markets are there to be won – Germany, with its large industrial base, and limited access to wind, recognises it will need to import hydrogen in the future.
Some in Germany now call renewables 'freedom energy'. Green hydrogen is the technology that unlocks that idea – it is the only fuel source that the UK can deploy at scale to replace fossil fuels. The Energy Security Strategy is a start, upon which the UK Government should build . The UK missed out on the first wave of renewable technology development, perhaps focussing too much on nuclear (Tony Bair back in 2006). Let's hope history does not repeat itself now that Prime Minister Johnson is making "the big call…by investing massively in nuclear power."
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