Our thoughts on the Energy aspects of today's Autumn Statement
Today, the Chancellor, Jeremy Hunt announced in his Autumn Statement that cheap, low carbon, reliable energy must sit at the heart of any modern economy and that energy efficiency and energy independence are key to the UK’s approach.
The Chancellor went on to say that the UK is a global leader in renewable energy, noting that last year nearly 40% of our electricity came from offshore wind, solar and other renewable sources. With the acceleration of homegrown technologies like offshore wind, Carbon Capture, Usage and Storage (CCUS) and nuclear, there will be more new jobs. Industries and export opportunities will grow, and the UK can secure clean, affordable and independent energy to power our future economy and reach our target of Net Zero. He announced that Sizewell C nuclear plant in the southeast of England would go ahead and contracts will be signed shortly.
The Government has also announced the Electricity Generator Levy. The government is introducing this new, temporary 45% levy on generator profits for electricity sold above £75 per MWh. The announcement confirms that this tax will not apply to electricity that is generated under a Contract for Difference (CfD) which should make having a CfD even more attractive for generators.
The UK has one of the world’s most attractive investment environments for low carbon energy. It has led the way on Net Zero, with much of the rest of the world now also signing up to this objective. This brings with it significant new prospects for highly skilled jobs in the future. Similarly, LCCC has many great opportunities to come – continuing to build on the success of the Contracts for Difference (CfD) as a mechanism for delivering the UK’s Net Zero ambitions. We are continuously investigating new technologies introduced into the energy system ensuring that the CfD is fit for purpose for future allocation rounds.
The CfD continues to drive down the cost of renewable power to the point where some technologies are now cheaper than that provided by fossil fuel power plants. Additionally, CfDs benefit and protect consumers from paying increased support costs when electricity prices are high. The strategic independence of renewables will reduce the country’s exposure to volatile global fossil fuel prices, which are currently pushing up energy bills for millions of households.
The announcement of annual CfD auctions, means that Allocation Round 5 (AR5), opening in March 2023, comes hot on the heels of Allocation Round 4 (AR4).
The fourth CfD round delivered energy from a greater number of renewable technologies than ever before, ensuring a more robust, secure and resilient energy system. AR4 effectively delivered:
- A record capacity of almost 11GW of clean energy, almost double the capacity achieved in the previous round.
- Enough energy to power around 12 million British homes with clean, affordable, homegrown energy, helping to reduce our exposure to volatile global prices.
- Almost 7GW of capacity from new offshore wind projects, increasing the country’s overall committed capacity in this technology by 35%.
I’m also delighted that this week the Department for Business, Energy and Industrial Strategy (BEIS) published the Dispatchable Power Agreement (DPA) . This CfD type contract will support investment in Carbon Capture Technology linked to decarbonising of gas fired electricity generation. BEIS has recognised the expertise of our teams at LCCC by allocating counterparty and settlement roles to us for power and industrial CCUS. It’s been great to advise BEIS on the development of policy and business models for forthcoming technologies and schemes.
We are gearing up to successfully deliver the DPA, as we have with the CfD, continuing to facilitate the UK’s journey to Net Zero. The UK has an estimated 78 billion tonnes of CO2 storage capacity, enough to support the UK’s demands for hundreds of years. The UK has one of the largest potential CO2 storage capacities in Europe. CCUS-enabled clusters could support up to 50,000 jobs by 2030, in the industrial heartlands of the UK.
Other innovative new schemes on the horizon for LCCC include the Hydrogen and new Nuclear. Sizewell C nuclear power station is expected to start construction next year when the Regulated Asset Base scheme goes live. This is a £20bn+ infrastructure project that will draw on the supply chains created for Hinkley Point C.
We are delivering schemes that will counter climate change and facilitate investment in further growth and expansion of decarbonisation technologies and associated supply chains. The diversity of projects supported by us will ensure secure, reliable home-grown power for decades to come, benefitting communities and businesses by modernising electricity generation across the UK.
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