Clean growth strategy to reshape energy industry

Further support for offshore wind power and an increasing focus on energy efficiency will be at the heart of a new “clean growth” strategy to be unveiled by the government this week.

Renewed backing for carbon capture and storage — a technology that prevents greenhouse gases from power stations and industrial facilities from reaching the atmosphere — is also expected in the long-delayed plan.

Support for a new generation of nuclear power stations will be reiterated despite the falling cost of rival technologies, but ministers are expected to stress that only the most cost effective energy projects will receive government support.

This will increase pressure on developers of proposed reactors in Wales and Cumbria to lower their costs below the £20bn Hinkley Point nuclear plant in Somerset which has been widely criticised for its heavy expense.

The sharp focus on affordability will also raise further questions about the viability of the £1.3bn Swansea Bay tidal power project which was recommended by a government-commissioned review in January but has not yet won the blessing of ministers.

As many as 50 measures are expected to be included in the blueprint for how the UK can meet legally-binding targets to reduce carbon emissions by 57 per cent from 1990 levels by 2032 according to people involved in the process.

Policies will span from the promotion of electric vehicles to backing for technologies to reduce energy demand and carbon emissions from homes and businesses.

While green energy investors are likely to be reassured by the government’s renewed commitment to the carbon reduction goals enshrined in the Climate Change Act, there may be disappointment at a lack of firm financial commitments in an announcement expected to dwell more on broad strategy than policy specifics.

The “clean growth” plan could come as early as Thursday, the same day that the government is due to publish draft legislation which will pave the way for a cap on the most expensive type of household gas and electricity bills, known as standard variable tariffs.

Energy companies have claimed that “green” policies, such as subsidies for renewable energy and energy efficiency measures, are among the main factors behind rising bills.

Ministers will dispute this by arguing that the economic benefits of energy efficiency measures and the falling cost of renewable power are already helping limit costs for consumers.

They will say that further investment in green technology will also deliver a dividend in economic growth and jobs as part of the government’s wider industrial strategy.

Ministers have been under pressure for months to set out their decarbonisation strategy, with companies claiming that policy uncertainty risked deterring investment. Among the areas in focus this week will be:

The strategy gives no further commitment to the £1.3bn Swansea Tidal Lagoon project © PA

1. Renewable energy auctions

Offshore wind developers have been pressing the government to commit to further subsidy auctions known as “contracts for difference” after a bidding round last month resulted in a dramatic fall, of more than 50 per cent, in the costs of developing wind farms off the UK coast.

This week’s announcements are expected to signal further appetite for offshore wind — a move that ministers hope will encourage developers to further expand their UK supply chains, creating jobs in the process. The door is likely to be left ajar for renewed onshore wind development where local support and planning consent exists, but without firm commitments. Onshore wind subsidies were scrapped by David Cameron’s government in 2015 in response to grassroots opposition in England.

2. Carbon capture and storage

CCS — a method of trapping carbon emissions emitted from power stations and factories and storing them underground — was an important part of the previous UK blueprint for tackling climate change published by the coalition government in 2011. But two experimental CCS projects collapsed in 2015 when the government unexpectedly pulled £1bn of funding. Claire Perry, minister for Climate Change and Industry told the Conservative party conference that she views CCS as a “vital technology” but Thursday’s plan is unlikely to reinstate the large-scale public funding that developers say is needed.

3. Nuclear power

The falling cost of renewable energy has raised questions over the government’s commitment to a new generation of nuclear plants to replace ageing reactors due to be decommissioned in coming years. Ministers insist nuclear remains critical to energy security and carbon reduction. But the focus on cost-effectiveness in Thursday’s announcement will signal that any future reactors would have to be cheaper than the nuclear plant under construction at Hinkley Point in Somerset. A similar message is likely on tidal power. A £1.3bn project to generate electricity from the tides in Swansea Bay was recommended by a government-commissioned review in January but ministers are yet to be convinced of its merit.

4. Heat and transport

While emissions from the power sector have fallen sharply as coal-fired plants are phased out, much less progress has been made in decarbonising transport, heat and industrial processes. A plan announced in July to ban sales of new petrol and diesel cars by 2040 signalled increasing policy support for electric vehicles. Thursday’s strategy will keep open options such as heat pumps and hydrogen gas as lower carbon alternatives to methane in domestic heating. But much of the focus will be on energy efficiency in homes and businesses as a way to reduce energy demand.

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