03 Jan What to expect in UK renewables for 2023
All areas of UK renewable electricity generation have been impacted by changing policies. The UK Government’s intended goals are to decarbonise electricity generation by accelerating the development of offshore wind, carbon capture and storage technology, hydrogen and nuclear.
Last year was a particularly disruptive time for the energy industry, and though renewables have become even more critical, the market requires further stability. Volatile oil prices, driven by geopolitical disruption, have created a sharp rise in electricity prices and a regulatory change in the shape of new taxes on oil and gas business profits and tax on revenues (exceeding a threshold of £75/MWh) for some renewable electricity sites. The reason for taxing renewable electricity generators is due to the profit occurring from abnormally high revenues from the electricity sold while not incurring additional fuel costs associated with wind and solar power.
The government initially explored the possibility of switching renewable generators to fixed price contracts for difference (CfDs) to reduce electricity prices, but this didn’t proceed. The UK government also announced additional support for nuclear power generation by investing £700 million in the Sizewell C nuclear power site, which will be developed by EDF but will now be part-owned by the government. This represents a considerable policy change and is the first direct government investment in nuclear since 1987.
Onshore wind also looks to have more of a future in the UK. After significant opposition to Rishi Sunak’s planned reversal of plans to revive onshore wind stated under Li Truss, the Department for Levelling Up, Housing and Communities agreed on a consultation to explore how the support from local communities for developing onshore wind sites can begin again.
The rise of new technologies
New technologies will inevitably emerge in the renewable energy industry, with hydrogen and battery energy storage (BESS) representing two major markets. The more mature BESS is receiving significant investment. The scale of projects under development and securing finance has increased rapidly in the last year and will likely continue growing.
The current capacity of UK BESS projects is under 2GW, but recent industry studies suggest that the collective pipeline of national projects lies in the region of 32GW, of which 10GW have secured planning approval. The National Grid estimates that the UK requires more than 50GW of BESS to achieve its 2050 net-zero targets.
While applying hydrogen in selected energy and industrial processes isn’t new, it’s now being considered in new ways, and the UK Hydrogen Strategy announced in 2021 sees hydrogen playing an increasingly important part in decarbonising the UK energy system. This has spurred on several new hydrogen pilot projects and financial support with a £105 million funding package introduced via the UK’s Net Zero Innovation Portfolio. The funding plan includes a series of grants to businesses and developers to support exploration and solutions to switch industries toward low-carbon fuels like green hydrogen.
Furthermore, in April 2022, the British Energy Security Strategy was published, outlining plans to double hydrogen production targets from 5 to 10GW by 2030. To achieve this target, the Net Zero Hydrogen Fund launched with £240 million worth of funding for low-carbon hydrogen projects.
After a disruptive year, the critical role renewables have in the UK energy industry has become very clear. Investment in new projects and technologies will continue to be essential as we decarbonise the energy industry and pursue our 2050 net zero goals.
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