Is the UK Energy White Paper setting the bar too high?


The UK’s energy white paper has just been unveiled by Boris Johnson. Structured in 10 points, this plan aims to make the country a world leader in energy transition. London intends to decarbonize most of its electricity by 2030 and achieve carbon neutrality by 2050. Although very ambitious, this plan nevertheless suffers from several areas of uncertainty concerning both its financing and its cost.

An extremely ambitious energy white paper

Decarbonization of the electricity sector in 2030

In unveiling its energy white paper, the British government is making a strong statement about its climate ambitions. For London, it is a question of using the energy transition as a lever for a possible reindustrialization of the country after Brexit. The plan aims to create more than 200,000 jobs, mainly in the northern regions of the country.

In order to achieve this goal, the government plans to install nearly 40 GW of offshore wind capacity by 2030. According to London, this will enable all British households to be supplied with low-carbon electricity. This offshore capacity will also provide the necessary means for a progressive electrification of the car fleet. Remember that Boris Johnson has just announced a ban on the sale of thermal vehicles from 2030.

The goal of carbon neutrality in 2050

The 10-point plan unveiled on December 14 does not stop at decarbonizing the electricity sector alone. By 2050, the UK hopes to be one of the first carbon neutral countries. This will involve decarbonizing sectors with very high abatement costs, such as air transport and cement.

To this end, the plan focuses onhydrogen and the development ofCO2 capture and storage technologies (CCUS). London plans to produce nearly 5 GW of hydrogen by 2030. For CCUS technologies, the objective is to create 4 pilot projects in the industry by this date. In all, the British government wants to reduce itsCO2 emissions by 68% within 10 years.

The issue of financing in the British energy white paper

A 12 billion pound plan

London therefore has very high ambitions in terms of decarbonizing its energy mix. However, the funding provided for in the energy white paper does not seem to match the UK’s ambitions. The plan provides for direct government support of up to 12 billion pounds. All else being equal, this is seven times less than the budget for the road renewal plan.

As much as to say that the financial envelope still seems very limited. Certainly, the government aims to attract nearly 40 billion in private investment. However, for areas with high abatement costs, this amount seems very insufficient to create a real dynamic. It should be remembered that today a CCUS unit is still far from being competitive without massive state subsidies.

Funding not up to ambitions

Another technology still very dependent on public support, hydrogen seems to be the poor relation of the British plan. The government has announced a £240 million budget to produce 5 GW of decarbonized hydrogen by 2030. However, this amount seems derisory for developing a non-competitive technology that will probably not be competitive before 2030. By comparison, France plans to invest nearly $7.2 billion in its “hydrogen” plan.

The same is true of funding for the electrification of automotive transport, with only £2 billion invested. To defend itself, London insists that the energy plan will benefit from the 280 billion dollar stimulus package. The difficulty is that it is currently difficult to evaluate precisely the share of the budget devoted to the energy transition. It is thus very likely that part of the stimulus package was used to finance fossil fuels.

The thorny issue of the cost of decarbonization

A high energy bill

The question of financing the energy plan inevitably leads to questions about the costs of a complete decarbonization of the electricity sector. Offshore wind power is still the most expensive of the main renewable energies (RE). As a result, its cost has only decreased by 20% since 2012 compared to 75% for solar.

In fact, the British government is exposing itself to a sharp increase in the energy bill paid by households. This is why London has decided to allocate nearly 7 billion pounds to a program of aid for low-income households. The British government also intends to rely on competition to bring down prices. In an already competitive environment, this measure is likely to have little effect on the prices paid by the consumer.

The problem of the stability of electrical networks

In addition to higher prices, rapidly decarbonizing the power sector will lead to changes in the management of power systems. The high penetration of intermittent offshore wind power could thus unbalance the grids at peak hours. Already this year, the grid operator had to rely on coal-fired power plants as reserve capacity.

In order to maintain the stability of the networks, the British Energy White Paper proposes to rely on nuclear energy. Thus, London has decided to open a new power plant in Sizewell at a cost of 22 billion euros. However, it is doubtful that such a project could be operational before 2030 given the recurrent delays in this sector.

As a result, there is a real risk to the balance of the power systems by 2030. Especially since the plan does not include efforts to modernize these networks. In any case, this problem reflects the many uncertainties surrounding the British plan.

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