Following closely on the heels of the National Energy System Operator (NESO) publishing its advice on how to achieve clean power for Great Britain by 2030, the Plan adopts many of that report’s assumptions. The foundational assumption is that “clean power” means the 2030 power system will see clean sources produce at least as much power as the UK consumes in total over a “typical weather year” and at least 95% of the UK’s generation. The Government also accepts its “central role” in steering the creation of this new energy system, setting expectations for the 2030 capacities of key technologies and the pathway to clean power, as we explore further below.
The Action Plan
At 137 pages plus technical annexures, the Plan sets out a broad blueprint, even if it lacks the detail and timetable some would prefer. In this article, we focus on: (a) the required pathway to achieve clean power via new and renewed energy infrastructure; (b) the Government’s intentions in terms of introducing new investment support schemes and changing existing ones; and (c) the Government’s proposal in terms of major regulatory reform.
The pathway to clean power
Of the two possible pathways advised by NESO, the Government has chosen something of a mix, with 50GW of additional offshore wind generation corresponding with “Pathway 1” (as set out in our earlier article), but capacity for new dispatchable power from gas with CCS or low-carbon also included. In summary, the chosen pathway for achieving clean power comprises (current figures apply to the end of 2023):
- 43 – 50 GW of offshore wind (currently 14.8GW);
- 27 – 29 GW of onshore wind (currently 14.2GW);
- 45 – 47 GW of solar power (currently 16.6GW);
- flexible capacity:
- 23 – 27 GW of short-duration storage capacity (current 4.5GW most at grid scale);
- 4 – 6 GW of long-duration energy storage (current 2.9GW mostly hydro); and
- development of flexibility technologies including low-carbon dispatchable power 2–7GW (currently zero) – this mainly comprises gas CCUS and hydrogen to power as well as consumer-led flexibility / demand side flexibility; and
- 80 network and enabling infrastructure projects (with the claim that most of these are already at an advanced stage of planning and development).
Under the Plan, UK energy supply will be protected up to 2030 with the maintenance of 35GW of unabated gas reserve capacity. Around twice as much new transmission network infrastructure will be required for the UK grid by 2030 as has been added in the past decade to 2024.
The Plan places significant focus on additional renewables capacity, particularly offshore wind projects which are notable historically for their lengthy development and construction timeline. Achieving the Plan relies heavily on the Government managing to accelerate completion of a very significant proportion of offshore wind projects already in active project development. The pathway technologies also rely mostly on established technologies (counting low-carbon technologies such as CCUS and hydrogen which are commercially unproven).
In terms of nuclear technologies, the Government commits to working with EDF to support the delivery of Hinkley Point C in Somerset and to extend the end of life of the four Advanced Gas-cooled Reactor nuclear power stations currently still in operation. It expects two of this fleet, Heysham 2 and Torness, to continue operation up to 2030.
Investment support schemes
The Government plans to improve the way Contracts for Difference (CfDs) are allocated for eligible technologies, particularly for Allocation Round 7 (AR7) due this year. It proposes several changes in addition to those already announced in October and November 2024, including the Clean Industry Bonus initiative, notably: (a) allowing offshore wind (fixed foundation) projects to participate despite not having first obtained planning consent; (b) greater flexibility for the Secretary of State to increase allocation round budgets later in the process (enabling the Government to have an easier time boosting contracted capacity); and (c) potentially, increasing the term of CfDs beyond 15 years, which would provide longer certainty of revenue to improve the eligible projects’ business cases.
In terms of offshore wind, the Government will seek to secure at least 12GW across each of the next two to three allocation rounds – AR7 (2025), AR8 (2026) and, “depending on the speed at which projects deploy”, AR9 (2027). A public consultation on the newly announced reforms will be issued early this year.
Publication of the Plan follows recent announcements of the Government’s intention to implement a “cap and floor” support scheme for long duration energy storage (LDES) and a dispatchable power agreement (DPA) style mechanism for hydrogen to power (H2P) (which will be similar to the DPA scheme already applicable in the UK for power CCUS). It will also look to enable H2P to participate in the Capacity Market “as soon as practical”. Both CCUS and green hydrogen are sectors designated to benefit from the additional GBP5.8 billion to be allocated to the National Wealth Fund for infrastructure investment.
Reflecting the need to significantly increase the UK’s short-duration storage capacity, the Government plans to introduce market reforms to enable batteries (the most prevalent technology for grid-scale storage) to access the Balancing Mechanism and the Capacity Market, improving their revenue opportunities. The Government also intends to publish a Low Carbon Flexibility Roadmap in 2025 on new actions to drive both short and long-duration flexibility for clean power in 2030 and net zero (for the 2050 goal), and to publicly consult on how the development of grid-scale batteries could be eased as part of future planning reforms.
Regulatory reform and planning
The Plan lacks precise details of intended regulatory reform in many respects but acknowledges that the current UK planning system is insufficient to deliver clean power by 2030 and there is a need to accelerate the planning regime for energy infrastructure.
In terms of planning, the Plan commits the Government to:
- introduce the Planning and Infrastructure Bill, first announced in the King’s Speech of July 2024 and expected early 2025. This will, among other things, update the Nationally Significant Infrastructure Planning (NSIP) system, amend the Planning Act 2008 for infrastructure projects, and prioritise and streamline the planning process for critical infrastructure (alongside the Government working with the Scottish Government to make complementary reforms in Scotland);
- explore reforming the judicial review process applying to the NSIP regime (following the recommendations made in Lord Banner’s report published in October 2024);
- reform the Environmental Permitting Regulations to facilitate clean power, with DEFRA consulting on the inclusion of grid-scale battery storage by June 2025;
- reintroduce English onshore wind projects into the NSIP regime at a new threshold of 100MW of capacity and alter the existing threshold for solar to 100MW (currently 50MW), easing planning requirements for projects smaller than those thresholds; and
- proceed with the delivery of Marine Recovery Funds for offshore wind projects (co-operating with the Scottish Government to do the same for projects in Scotland).
Marine Recovery Funds were introduced under the Energy Act 2023 (passed by the previous Government but relevant parts not yet implemented). The Government claims the Offshore Wind Environmental Improvement Package – Part 13 of the Act – will accelerate and de-risk the consent of offshore wind projects whilst continuing to protect the marine environment.
Further to the Chancellor’s announcement of a 12-month review of National Policy Statements in July 2024, the Government also states its intention to update the National Policy Statements for energy and the Planning Practice Guidance for renewable and low-carbon energy in 2025. This is in addition to the changes to support clean energy development already announced in respect of the National Planning Policy Framework for England.
As regards the grid, the Plan sets out the Government’s commitment to fundamentally reforming connections, accelerating the connection queue and prioritising clean power projects and further electricity market reform. It commits to ensure wholesale electricity market reforms in line with the Review of Electricity Market Arrangements (REMA) programme, including the Autumn Update (released at the same time as the Plan), regarding longer-term reforms to the CfD and Capacity Market schemes. The Plan states an aim to conclude policy development for the programme by around mid-2025, in time for AR7 but with significant changes to CfDs under REMA not coming into effect until later allocation rounds. In the Autumn Update, the Government states that it is considering zonal pricing or reformed national pricing for the electricity market.
Next steps
The Government’s end of 2024 announcements capped a furious five months of policy development on UK energy and infrastructure, some new and some based on what has come before under previous governments.
We will continue to update you on these developments as the UK commences its six-year journey toward clean power. In the meantime, please contact your usual A&O Shearman contact for further discussion, or the named contacts on this bulletin.