The UK is focused on developing a future energy system fit for the energy transition. One that enhances efficiency, reliability and reduces emissions, accommodates new renewables developments of greater scale and number, and is flexible enough to adapt to the wider landscape of new developments that might affect the use of the electricity system. These include the emerging hydrogen sector in all its various colours, the electrification of the transport sector, carbon capture schemes and the related infrastructure to transport and store carbon, decarbonisation of industrial clusters, RAB-supported new nuclear build, nascent programmes for small modular reactor technologies, new “cap and floor” based interconnectors (some with large captive overseas renewables projects from which to import power), multi-purpose interconnectors, offshore hubs, subsea HVDC transmission bootstraps, energy islands and many more.
Into this complex mix sits the target of net zero emissions by 2050 and interim targets towards that. This has kept policy makers frantic with new energy legislation, support schemes and various other mechanisms to maintain momentum and growth in renewable energies as well as provide the right signals to the other parts of the energy industry.
The UK enacted The Energy Act 2023, a major new legal framework that establishes new or modified rules for energy production, security and sectoral regulation. The Act reforms many areas. Among other things, it introduces new frameworks such as for Carbon Capture and Storage, new mechanisms to support technologies such as low-carbon hydrogen projects, and seeks to facilitate speedier deployment of or projects by, for example, making changes to environmental regulations for offshore wind.
The UK remains firmly committed to developing offshore wind, currently contributing approximately 13% to the electricity mix. The renewable source has an ambitious target to deploy up to 50 GW by 2030, making it a key component in decarbonising the power system by 2035. This growth is facilitated by the recent leasing rounds, supporting, and authorising the development of offshore wind projects around the UK. Furthermore, the recent legislative changes to the environmental regulations will improve the cost and time efficiency for project timelines.
The Contracts for Difference (CfD) regime developed in 2012 remains the Government’s flagship scheme to encourage investment in renewable electricity generation. It is seen widely across government and industry as a successful programme that has supported renewable projects for technologies such as offshore wind, solar and tidal and has played a pivotal role in the expansion of renewable energy. Not surprisingly, proposals for new technologies and schemes frequently draw heavily on the CfD regime.
Offshore wind has pride of place in the pantheon of technologies that the UK is looking to catalyse. Outside of China, the UK’s offshore wind capacity and programmes remain the largest in the world, currently contributing approximately 13% to the electricity mix. With an ambitious target to deploy up to 50 GW by 2030, the recent lack of bids for offshore wind CfDs in Allocation Round 5 felt like a knockback for the sector. However, the pipeline of offshore projects is vast, with further site leasing rounds planned that will expand this pipeline even further. While there are many hurdles for projects to be consented, financed and commissioned, there seems to be cross-party support from both the Conservative government as well as His Majesty’s Most Loyal Opposition that genuine geopolitical issues (impacting prices and borrowing costs for the offshore sector) are addressed to avoid derailing these ambitious plans.
The number of developments is broad and so for the purposes of this chapter we have focused on the CFD regime, the Electricity Generation Levy and the expansion of offshore wind as three illustrative areas.
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