Response to UK Government’s Energy Security Strategy

Commenting on the Government’s Energy Security Strategy out today, Simon Virley CB, Vice Chair and Head of Energy and Natural Resources at KPMG said:

“The ambition in the Government’s Energy Security Strategy is laudable and the decision to double down on Net Zero the right one.  However, this strategy won’t get us to Net Zero at least cost to consumers.  Given the importance of tackling the cost of living crisis, this is a missed opportunity.

“According to BEIS (see table 1), over 80% of the public support onshore wind and it is the cheapest form of low carbon electricity. By not pursuing it actively, we are making the transition to Net Zero more expensive than it needs to be.

“The best way to reduce energy bills permanently, cut emissions, and reduce our dependence on imported gas is a step change in energy efficiency.  Other European countries, like Holland, France and Germany, are doing this as a matter of urgency as part of their response to the Russia/Ukraine crisis.  Yet the UK Strategy is almost silent on measures to improve energy efficiency.

“New nuclear can play a role in delivering large volumes of low carbon electricity.  But any new nuclear power stations beyond Hinkley Point C are likely to be more than 10 years away from generating any power.  As the old nuclear stations come off the system, along with biomass power plants, support for which ends in 2027, then we could well see the gap filled by unabated gas, pushing up the carbon intensity of our power system just at the time the Government is encouraging people to buy EVs and heat pumps.

“Raising the ambition yet further on offshore wind is all well and good and the appetite from investors in renewables remains strong.  But unless the non-financial barriers to renewables deployment, like planning, consenting and timely grid connections, are tackled as a matter of urgency, it is unclear how the current rate of deployment can speed up significantly.

“The increase in ambition on hydrogen production is welcome.  But we need to have a whole system approach to building the hydrogen economy, with measures to stimulate demand, like the mandating of hydrogen-ready boilers by 2025, as well as new targets for supply.

“The cost of balancing the grid is rising sharply and forecast to reach £2.5bn a year by mid-decade according to the Electricity System Operator.  This underlines the need for greater flexibility in our power system, including getting in place the right regulatory incentives for demand side response and long-duration storage.

“The Government has set out plans for the establishment of a Future System Operator (FSO).  The FSO needs to be given a clear mandate to develop a strategic national plan for the transmission networks we are going to need to deliver Net Zero, on and offshore.”