How Closer Can Labor Get to a Zero Carbon UK Power Grid?

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(Bloomberg) — Britain’s new government wants a zero-carbon electricity system by the end of the decade. Now you should know what it means and what you can do about it.

The question is whether it succeeds in being 100% clean all the time or whether the country can still use fossil fuels as an emergency reserve.

Either way, achieving these goals will require Prime Minister Keir Starmer’s government to stimulate billions of pounds of additional investment in renewable energy, an area that has seen delays and rising costs.

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It is also necessary to review planning rules and overcome local opposition to green projects, such as the outcry of some residents near the three main solar farms that were approved in the first few days of the administration.

Despite the challenges, for the government, the green box is a goal that defines some of its main ambitions: cut costs for consumers, increase investment and jobs, develop Britain’s stagnant economy and rebuild the country as a global leader in the fight against the climate crisis.

“Time is short,” said Ed Birkett​​​​, director of new projects at renewable energy developer Low Carbon Investment Management Ltd. .”

Labor has pledged to rapidly expand renewable power plants to reduce reliance on expensive, imported natural gas. The government wants to increase offshore wind farm capacity to 55 gigawatts, triple solar power and more than double onshore wind farms.

Some admit that all this will take time. A spokesman for the prime minister said this week that it was not a case of flicking through the cracks and delivering the project at once.

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GB Energy

To get moving, the government introduced a range of new measures, including the launch of state-run GB Energy and legislation to overhaul a planning regime that has long appeared to hold back development.

The effort means more electricity is produced with clean energy, but the question is whether it will go far enough to meet the 2030 target. The government may be close – with fossil fuels only used as a backup – but the political question is whether Labor can sell it as a win.

“A year-round decarbonized electricity system is unrealistic to achieve in the next five years,” said Tom Smout, senior associate at Aurora Energy Research. “But depending on how you define the target, there will be a time when the system will be zero carbon.”

As early as next year, UK grid operators expect to see a time when the country’s entire energy system is zero carbon. Any acceleration Labor does will increase that time.

In the renewable energy sector, there is confidence that the government is committed. This is a new experience after the previous administration backed away from some environmental policies.

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“The industry has read these targets as a very clear objective from the government to rapidly increase the supply of clean energy and rapidly improve the network infrastructure to support it,” said Adam Berman, deputy director of industry group Energy UK.

The UK power system has seen a huge increase in wind power, and the use of coal has dropped close to zero. But gas still accounts for about a third of electricity generation.

Labor has touted the potential for low-carbon technologies to complement wind, such as power plants with carbon capture technology or those that burn clean-burning hydrogen.

But in winter, when demand is highest, periods of no wind mean the power system needs to fill the gap. Labour’s own plan refers to maintaining some spare gas power stations.

“You can call the zero carbon system because it’s not fired unless it’s a very bad day,” said Arhnue Tan, analyst at BloombergNEF. “It’s basically zero carbon, but it’s still safe because we don’t know how to replace the gas that hasn’t been done yet.”

Wind Auction Test

A big test will take place this summer, when the government hopes to get wind farm operators to bid for government power contracts under a system intended to spur investment.

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The last government increased the budget for contracts for different auctions after the embarrassing failure in 2023, but it still seems too small to support all the projects that are now ready.

Ed Miliband, secretary of state for energy security and net zero, said funding could be increased further.

“The biggest indicator that the government is serious about pursuing this aggressively is the CfD budget,” Berman said. “If you want to reach 2030, it will be very difficult to refuse any project that can offer the CfD process.”

However, expanding the budget can undermine the goal of using renewable energy to reduce prices. More money will allow more projects to be built faster, but if all bidders can win the contract at a certain price, that reduces competition. There is no incentive to provide electricity supply at lower prices.

Building new wind farms and solar parks is just one aspect of the challenge of maximizing green power on a tight timeline. The important thing is to design and build a power grid that can support all these new resources.

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There are a number of hurdles, including reforms to the planning regime that developers must complete before they can start building. Another is the long queue for new renewable power assets to connect to the electricity grid.

One of the government’s selling points is that it will attract lower energy prices after natural gas prices rise in 2022 causing household bills to rise.

“The reason we are moving at this pace is for one overriding reason, because of the urgency of the challenge,” Miliband said in Parliament last week. “If we don’t build, for example, the grid, if we don’t put out solar, we will be poorer as a country. We are really opening up the cost of living crisis in the future.

—With assistance from Ellen Milligan.

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