Future of the UK Renewable Energy Sector

Future of the UK Renewable Energy Sector

Now that Theresa May has formed a new Cabinet, geared to detach the UK from the EU following the referendum on 23 June, we can start to consider possible implications for the renewable energy sector in the UK.

It seems unlikely that there will be any major legislative or regulatory changes in the near future, but an easy conclusion to draw from the UK’s decoupling from the EU is that it should now be able to drive its own interpretation of the way towards a lower carbon emission future.

In 2009, EU legislation was enacted, setting a target for 20% of its energy to come from renewable sources by 2020*, translating into a 15% target for the UK*. Through the Coalition government of the time, DECC set up a roadmap to reach this target by having 30% of electricity, 12% of heat and 10% of transport come from renewable sources*. At the time, there was some scepticism as to the UK’s ability to meet this target (which wasn’t helped by a leaked letter from the then Energy Secretary Amber Rudd in November 2015, admitting internal forecasts predict a level closer to 11.5% by 2020*).

From the EU’s perspective, the agreed target is legally binding and the European Commission has the power to take legal action against member states that do not meet their obligations. However, the expectation is that once the UK has detached itself from the EU, it will be left with responsibility for its own targets, and control over how UK policy can be used to meet them. To a certain extent, this is already happening and so there may not be any need for material changes to existing policy. For example, the Climate Change Act was enacted in 2008, articulating the UK’s own goals to reduce its carbon emissions by 80% by 2050 (compared to 1990 levels)*. In addition, at the end of June this year, Amber Rudd announced the fifth Carbon Budget which proposes a carbon reduction target of 57% from 2027 to 2032, which should keep the UK on track to reaching its 2050 target*. There is, however, more that needs to be done here – whilst the annual progress report of the Committee on Climate Change shows that emissions have fallen quite rapidly in the power sector, progress in sectors such as heat and transport has stalled*.

Graph - Blog

On the formation of Theresa May’s Cabinet on 14 July 2016, DECC was abolished and replaced by the Department for Business, Energy and Industrial Strategy, headed by Greg Clark. In a statement made on the day of his appointment Clark states “I am thrilled to have been appointed to lead this new department charged with […] clean energy and tackling climate change”*. At the moment, it is too early to tell whether or not this restructuring signals a change to the government’s stance on renewable energy, but previous Secretaries of State, such as Ed Davey and Ed Miliband, have indicated that the elimination of a dedicated department like DECC could mean a setback for the sector*.

One crucial factor in the government’s thinking for the UK energy sector as a whole will be the progress of the Hinkley Point C nuclear power plant. According to the National Audit Office, the cost competitiveness of nuclear power generators like Hinkley Point C is weakening as renewable energy such as wind and solar become more established*. Moreover, due to low electricity prices, the strike price of £92/MWh is currently almost three times higher than the wholesale market price. In addition, it is currently not at all clear what EDF’s current appetite for this project is.

Although the fifth Carbon Budget has been approved, and managing carbon emissions will remain a national and international obligation, the long-term strategy of reaching this goal is open to legislative interpretation of the new and future governments in a UK outside of the EU. One hopes that renewable energy will play a prominent role in that strategy.

*http://ec.europa.eu/clima/policies/strategies/2020/index_en.htm
*https://fullfact.org/economy/uks-renewable-energy-target/
*https://www.gov.uk/government/collections/uk-renewable-energy-roadmap
*https://www.theguardian.com/environment/2015/nov/09/energy-minister-expects-uk-to-miss-renewables-target-leaked-letter-shows
*http://www.legislation.gov.uk/ukpga/2008/27/part/1/crossheading/the-target-for-2050
*http://blueandgreentomorrow.com/2016/06/30/uk-government-confirms-fifth-carbon-budget/
*https://www.theccc.org.uk/publication/meeting-carbon-budgets-2016-progress-report-to-parliament/?utm_source=Energy%20Saving%20Trust%20Ltd&utm_medium=email&utm_campaign=7283547_01_07_16%20Weekly%20Policy%20Update&utm_content=CCC%202016%20progress%20report&dm_i=N26,4C40R,LQ9EX5,FW56D,1
*https://www.gov.uk/government/news/statement-from-greg-clark-secretary-of-state-for-business-energy-and-industrial-strategy
*https://www.theguardian.com/environment/2016/jul/15/decc-abolition-major-setback-for-uk-climate-change-efforts
*https://www.nao.org.uk/wp-content/uploads/2016/07/Nuclear-power-in-the-UK.pdf

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