Find someone who looks at you the way Rishi Sunak and Claire Coutinho look at new gas-fired power stations.
That appears to be the key message the government wants to convey from today's unveiling of the biggest set of energy market reforms in more than a decade. The second consultation on the Review of Electricity Market Arrangements (REMA) could include potentially transformative proposals to boost investment in renewables, curb energy bills and reshape Britain's economic and industrial geography, but its almost exclusive focus of this morning's government press release is ministerial media round, and Coutinho's speech at Chatham House is about plans that may or may not result in a handful of new gas-fired power stations.
The discrepancy between the content of what the government actually announces and the associated media attention is as disorienting as it is bizarre.
The message the government wants to emphasize is that, in Sunak's words, it will “not gamble with our energy security” and “will make the tough decisions so that no matter what scenario we face, we always make Britain belong to Britain.” can provide”. For Coutinho, this means “gas in support of renewable energy sources” to avoid “the real prospect of power outages”.
“There are no easy solutions in energy, only tradeoffs,” she added. “If countries are forced to choose between clean energy and keeping citizens safe and warm, believe me, they will choose to keep the lights on. We will not allow ourselves to be put in that position. And so, as we continue to push for clean energy, energy, we have to be realistic.”
But none of this is as controversial as the government seems to think. Expecting credit for keeping the lights on is akin to an Education Minister wanting thanks for his “great job” in keeping school ceilings from falling on students. Nobody wants blackouts. Decarbonizing the grid while maintaining energy security and affordability is literally the task.
Notably, Ed Miliband, secretary of Shadow Energy Security and Net Zero, was quick this morning to declare that “we must of course replace aging gas-fired power stations as part of a carbon-free energy system, with carbon capture and hydrogen playing a limited role.” back-up role in the system”. The government may want to create electoral divisions here, but they are not as pronounced as number 10 seems to think.
In this context, the government's proposals to reform the capacity market to deliver reliable gas flow capacity are broadly sensible – as far as they go. It is useful to clarify how 'net zero ready' gas-fired power plants can transition to installing carbon capture and storage (CCS) technology or to using clean hydrogen. It is also hugely welcome to see the Government talking about improved support for lower carbon forms of back-up capacity. And given the importance of keeping the lights on and the significant uncertainties that characterize the net-zero transition, it is probably wise to introduce some more flexibility in how and when gas-fired power stations can be deployed.
But as energy analyst Tom Haddon noted this morning on X “for the culture war warriors,” “there is literally nothing new about encouraging new/refurbished gas plants. [It’s] has been the core objective of the capacity market for years. This is nothing new or to get angry about.”
What is worth getting angry about is the way in which these proposed reforms fail to fully integrate with a broader decarbonization strategy, which remains seriously underpowered and characterized by numerous inconsistencies and contradictions.
The most important part of the REMA package regarding the alleged new gas-fired power stations the government wants to see is the vague commitments to continue advancing the long-awaited policies on CCS and hydrogen. “To ensure clear pathways for decarbonisation of our remaining, unabated gas generation, greater hydrogen and CO2 capacity should be available in the future,” the consultation said. “This comprehensive build-out of flexible low-carbon capacity and supporting infrastructure to secure electricity supply to 2035 and beyond will require sustained investment through public policy frameworks to leverage private finance.” Well, yes. Everyone knows this, but where are these policy frameworks?
Since the last wave of electricity market reforms over a decade ago, it has been clear that the UK's energy sector decarbonisation targets and wider net zero targets will be achieved through a renewables-dominated smart electricity grid, complemented by nuclear power stations, CCS and/or hydrogen power stations. In the ensuing decade, renewable energy rollout has accelerated, albeit not quickly enough, and a pipeline for nuclear, CCS and hydrogen projects has belatedly taken shape. But despite the government recognizing that this pipeline is essential to the UK's energy security and climate goals, ministers still need to make the policy decisions that will ensure projects can actually progress.
As such, the government is in a position this morning to urge gas companies to deliver net-zero gas plants, but without explaining the crucial context in which those plants would later have to wipe out their emissions.
The same inconsistency is evident in the potentially transformative proposals to introduce a location-based pricing regime for the wholesale market. These reforms should help optimize the electricity grid, reduce energy costs and accelerate the development of renewable energy sources by minimizing the need for accompanying transmission and energy storage projects. But as many within the industry noted yesterday, encouraging the development of renewables that are closer to the largest sources of energy demand only works if the planning system allows those new projects to be built. Currently this is not the case. Without significant planning reforms, these proposals risk falling apart, or worse, could undermine investment in urgently needed renewable energy projects.
“Changes to electricity markets will need to work in tandem with a range of broader policy actions currently underway to accelerate the pace of network build, shorten connection timescales and take a more strategic and coordinated approach to spatial planning for energy infrastructure,” according to the consultation. Again, yes, but the government is simply putting a spotlight on a problem it has been unable to solve for more than a decade.
If ministers were truly concerned about energy security, they would have appropriately lifted the 'de facto' ban on new onshore wind farms, provided sufficient funding for the next offshore wind auction, made a final investment decision for Sizewell C and launched a credible national energy project. efficiency strategy. They would also question whether energy security is really best served by locking in Britain's dependence on inherently volatile gas imports and domestic gas from a declining North Sea basin, and whether alternative forms of backup power could prove more reliable. If they still concluded that they really want new gas plants to play a role in the net-zero transition, they would stop waiting and set out how and when these plants can expect to deploy CCS or switch to hydrogen.
Instead, the fixation on delivering more gas investment may distract from the urgent policy choices needed to deliver a realistic and energy-secure net-zero strategy. A strategy that is urgently needed if Britain is to have any chance of catalysing the investment needed to meet the emissions targets it is currently on the verge of missing. If the Prime Minister wants credit for making “the tough decisions so that no matter what scenario we face, we can always provide Britain with Britain”, he should try to make some of them.
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