Q2 2024: The new government’s plans for the electricity sector

The last two years of Conservative governance saw a change in focus for UK energy policy, with boosted targets for renewables followed by rollbacks on key net-zero policies. The new Labour Government’s manifesto set out an ambitious plan to put energy security and climate change at the top of the political agenda. It promised to decarbonise electricity by 2030, gain energy independence from foreign powers, and setup a state-owned company: Great British Energy. After their first months in power, we reflect on what these promises and recent announcements mean for the electricity sector.

Increased funding for renewables

While we know the date of their clean power target, Labour are yet to release estimates of the investment required to meet their goal of decarbonising electricity by 2030. It is likely to be a substantial sum, as the previous Conservative Government had estimated that achieving a clean power grid by 2035 would require £275–375 billion of public and private investment, alongside a further £50–150 billion for electricity networks. Investment in wind and solar power are a key component of these overall costs.

Contract for Differences (CFD) auctions have been the main way to procure renewables since 2014, but the last auction in March 2023 failed to attract any investment in offshore wind, as costs had increased. The previous government had already allocated a record £1 billion to the scheme this year, but the new government has now raised this budget a further 50% – amounting to £23 per person. To get back on track to delivering 50 GW of offshore wind by 2030, the next two CFD auction rounds need to procure 10 GW each. The previous AR6 budget was sufficient to procure just 3–5 GW, and while Labour have increased that budget, it is still only consistent with procuring 4–7 GW.

The budget allocated to CFD auction rounds from AR1 in 2014 to AR6 in 2024. Emerging technologies include floating offshore wind, tidal power and geothermal.

Revised planning rules

Moving the target for zero-carbon electricity from 2035 to 2030 is ambitious. In just over five years we must replace the one-third of electricity still supplied by fossil fuels. The pathway for achieving this is reasonably clear though: the Climate Change Committee provide roadmaps with rapid growth of wind and solar power, backed up by energy storage and clean flexible generation: gas with CCS, biomass and hydrogen. The question is less what to do, and more how to deliver. Enacting these changes quickly requires massive financing, overcoming technical changes in managing the power system, and above all an overhaul of planning regulations which have stifled renewables for years.

Planning reforms have been at the forefront of recent government announcements. At the end of July, the government laid out their proposed reforms to the National Planning Policy Framework (NPPF) and the 2008 Planning Act. Just four days after the general election, the government lifted the de-facto ban of onshore wind. The NPPF applied community ‘tests’ which were so restrictive that in 2023, not a single planning application for an onshore wind farm was submitted in England.

The government are also preparing to ease the procedural constraints for large solar and wind projects. The 2008 Planning Act prevents local councils from approving Nationally Significant Infrastructure Projects (NSIPs) over 50 MW, leading to a backlog of a dozen large-scale wind and solar projects that only the Secretary of State has the power to approve. Many solar farms therefore limit their capacity to 49.9 MW to avoid the cost and delays of planning regulations (e.g. Larks Green and Nuneham). Eight days after the general election, Ed Miliband sent a clear signal to developers of the change in heart, giving consent to 1.35 GW of new solar farms in Lincolnshire and Cambridgeshire, enough to power 400,000 homes. As part of their planning consultation, the government proposed that local authorities should be allowed the final say over larger onshore wind and solar farms, up to 100 and 150 MW respectively.

A focus on energy security

Since Russia’s invasion of Ukraine and the subsequent gas market crisis, the subject of energy independence has become increasingly important to British policymakers. The UK relies on foreign imports for much of its supply of fossil fuels. We import nearly half of the oil and gas we use, and almost all of the coal [1]. We also import one-sixth of our electricity [1], and building more interconnectors between Britain and the continent is part of the plan for handling more wind and solar power.

Share of imports for the UK’s main energy sources in 2023. Circles are sized by annual energy consumed.

The government’s Energy Independence Act pledges independence from foreign energy imports, but it does not yet specify whether this extends to electricity. A power system that trades extensively with its neighbours for stability and to lower costs could reasonably be considered ‘independent’ if the two-way trade is on a roughly equal footing. If four times more electricity is imported than exported (currently the case for Britain) then perhaps it would not.

Reducing imports will require new generating capacity, so a strong commitment to new renewables projects in the next CFD Auction will help. However, Britain also needs more capacity that can generate at times when the wind is not blowing nor the sun shining, so more energy storage plus flexible and controllable power generation is needed to reduce imports.

A new mode of delivery

On the 25 July, Great British Energy was founded, backed by £8.3 billion of new money over this Parliament. It will own, manage, and operate clean power projects, focusing on technologies where markets are less mature to crowd-in private investment. It is hoped this will enable faster buildout, support new technologies such as floating wind, hydrogen, and carbon capture, and invest in clean energy supply chains. Partnering with the Crown Estate, they plan to deliver up to 20–30 GW of extra offshore wind seabed leases by 2030, ensuring that the next round of leases has lower risk for developers.

Great British Energy will also explore opportunities to support energy projects in their early development stages (e.g., by securing planning consent or a grid connection) to accelerate delivery and its Local Power Plan aims to develop up to 8 GW of small- and medium-scale cleaner power, part-owned by local communities. The next few months will see its headquarters established, staff recruited, and stakeholder engagement begin, putting Great British Energy on a delivery footing.

While the dust may have only just settled on the results of the general election, the new government’s earliest commitments signal a clear intent to put clean energy at the heart of policy moving forward.

[1] These statistics are net imports (gross imports minus gross exports).