The Clean Power 2030 push has taken on additional significance following the Prime Minister's "Plan for Change” speech on December 5 (and as further detailed in the related document presented to Parliament the same day). One of the six key milestones he announced was to put the UK on track to deliver at least 95% clean power by 2030. Notably, this 95% figure ties directly to the findings of NESO’s Clean Power 2030 report explored further below.
National Energy System Operator
On October 1, the Government announced1 NESO’s launch, a new public corporation with the responsibility of ensuring reliable, clean and affordable energy.
How did NESO come about?
The UK’s National Grid has operated since 1935, managing the country’s distribution and transmission networks for energy. In April 2019, the electricity system operator part of the business became a separate legal entity within National Grid PLC. It was known as National Grid ESO, or ESO. The concept of a Future System Operator (FSO) for the UK arose in connection with an Ofgem review2 of the UK energy system in 2021, along with a subsequent joint consultation between Ofgem and BEIS on behalf of the Government under Boris Johnson. The FSO would operate as an independent expert with a duty to facilitate net zero while maintaining security of supply.
The Energy Act 2023 laid the legal groundwork for the creation of this body and the transfer of the ownership of ESO to it. In January, ESO announced that the name for the new FSO would be NESO. The October announcement follows a Decision Notice3 made on September 13 which fulfilled certain legal machinery required under the Energy Act, including transfer of ESO’s transmission licence and the grant of a new Gas System Planner Licence to NESO.
Why is NESO important?
Unlike ESO, NESO is a publicly owned company, independent from government control, although still subject to Ofgem’s oversight.
NESO assumes ESO’s role of real-time balancing of UK electricity markets but also has additional roles:
- a duty to facilitate net-zero.
- operating gas supply as well as electricity.
- strategic planning in relation to both networks (including planning previously done by the National Gas Transmission) and participating in the UK’s decarbonisation strategy.
- strengthening the resilience of the energy system and UK energy security.
The Government’s intention is that NESO will assist on several fronts: connecting new generation projects to the grid more efficiently; working with the new GBE to deploy renewables; improving investor confidence in new energy infrastructure; and otherwise supporting the Government’s net-zero efforts.
Clean Power 2030 report
The new NESO has hit the ground running with its role as strategic planner, with one of its first actions being the publication of the Clean Power 2030 report (CP30)4.
Commissioned by Energy Secretary Ed Miliband, CP30 advises the Government on how the UK can best achieve its clean power ambitions by 2030. Primarily, this includes Labour’s manifesto promise to remove fossil fuels “almost entirely” from UK power generation by 2030 as highlighted in our previous article. The Energy Secretary, along with the new Mission Control and Clean Power 2030 Advisory Commission, will consider CP30 in developing the Government’s own clean power action plan promised later this year.5
CP30’s recommendations are significant, not just in terms of scope but also cost. The report acknowledges the “huge challenge” in developing the necessary system, market and infrastructure changes and that achieving them will involve an investment programme averaging GBP40 billion or more annually.
What is clean power?
CP30 describes ‘clean power’ as the scenario where unabated gas generation makes up less than 5% of the UK’s power generation in a typical weather year.
The report acknowledges the Government’s initial steps to support its ambition, including lifting planning restrictions for onshore wind in England, increasing the budget for the Sixth Allocation Round (AR6) of the Government’s Contracts for Difference (CfD) scheme (impacting notably on offshore wind6) and continuing to support the previous Government’s range of CCS (Carbon Capture Storage) projects and low-carbon hydrogen production.
In large part due to the successes of the CfD scheme, the share of electricity generation from natural gas (from gas-fired plants not using CCS) has fallen to around a third. Overall, the UK has improved its energy efficiency, however a further 12% of electricity demand was met by imported power in 2023.
Pathways to clean power
CP30 identifies two primary clean power pathways, building on an approach taken from its predecessor, the National Grid ESO, and its Future Energy Scenarios 2024:7.
- Pathway 1: builds 50GW of offshore wind by 2030 (compared to the current slightly over 15GW), but no new dispatchable power from gas with CCS or low-carbon hydrogen.
- Pathway 2: builds 43GW of new offshore wind by 2030, delivers new dispatchable plants from gas with CCS or low-carbon hydrogen (totalling 2.7GW).
The report acknowledges either pathway involves a “dramatic acceleration” in progress compared to anything achieved historically, with risks and challenges at the portfolio and project levels, but asserts the challenge is feasibly deliverable.
Either pathway also involves the following actions (required for net zero but with an accelerated timetable for the 2030 goal):
- an early electrification of heat, transport and industry.
- very substantial increases in generation capacity of other technologies: onshore wind (doubling from 14GW to 27GW), solar (tripling from 15GW to 47GW), along with the Government negotiating life extensions to nuclear plants due to soon be retired.
- a four-to-fivefold increase in demand flexibility with an increase in grid connected battery storage from 5GW (in 2023) to between 22GW and 27GW,9 with key long-duration energy storage (LDES)10 expanding from 3GW (in 2023) to between 5GW and 8GW.
- significant levels of new demand connections to the electricity network across transmission and distribution — NESO acknowledges this involves both grid upgrades and “connection reform".11
- utilising grid-enhancing technologies — hardware and software solutions that allow capacity to be increased along existing lines.
- an evolution of system operation, which NESO considers achievable and will be reflected in future planning and addressed in its March 2025 Operability Strategy Report.
- operation of the system will need to evolve too, which can be done and will be reflected through NESO's developing plans, which will be updated to align with the clean power goal.
Overall, delivery of a clean power system in 2030 will require an installed generation and storage capacity of around 210-220GW. Network infrastructure will have to be built at four times the speed of the last decade. Both pathways also assume significant planning reform by the Government, which it has promised, particularly for the required offshore wind capacity to be delivered in time for 2030. CP30 does not generally investigate what specific planning reforms are required, although it expects a focus on commencing necessary projects and ensuring completed projects are connected to the grid as quickly as possible.
Each pathway also incorporates two wider sensitivities, which offer more stretching levels of deployment of key technologies. These allow flexibility at the pathway’s margins. For example, onshore wind and solar could substitute for offshore wind, more demand side response could substitute for battery storage and more hydrogen or CCS could substitute for most other supply options.
Implications of CP30
We can assume CP30 will inform the Government’s own clean energy planning, although clearly fiscal constraints may impact on its full implementation.
Both pathways involve a heavy focus on offshore wind to provide clean energy generation, an issue we have discussed in our previous article. Fortunately, CP30 goals align with the Government’s separate target for offshore wind so this is something it has already been focusing on. CP30 requires as much offshore wind capacity to be contracted in the next two years as in the last six years combined.
Recently, DESNZ published12 a response to consultations on policy considerations for CfD rounds which includes amendments to the CfD scheme covering next year’s AR7 as well as future rounds. Given CP30’s advice, it is not unreasonable to expect further changes to the scheme potentially placing greater emphasis on contracting capacity over value for money.
The second pathway involves less offshore wind but requires low-carbon technologies such as CCS and hydrogen. This would place less stress on offshore wind supply chains and potentially lowers system costs but involves newer, and to some extent riskier, technologies which may need more government support to drive investment. Retaining gas in the electrical system with CCS also leaves exposure to international gas prices which the Government has signalled it wishes to move away from.
Onshore wind and solar can deploy faster than offshore wind and NESO suggests the Government could include smaller community-scale projects. The results of AR6 have reminded us however that onshore wind may need more support against cheaper solar projects if they continue to compete in the same technology pot.
Also of note is the requirement to rapidly expand storage capacity to balance the planned new influx of renewable power. The UK can still leverage a small amount of hydro-sourced pumped storage, but most storage today is sourced from batteries. Increasing investment in battery storage to the necessary amounts may also require additional government support. The recommendation to expand the more expensive LDES follows the Government’s recent announcement13 that it has launched a new LDES investment support scheme to help build energy storage infrastructure. This is expected to commence in 2025.
UK Strategic Spatial Energy Plan
In May, the previous Government committed14 to the production of a Strategic Spatial Energy Plan (SSEP) for UK energy out to 2050, setting out potential locations for new energy infrastructure. More recently, energy ministers in the UK, Scottish and Welsh Governments have commissioned the newly formed NESO to produce the SSEP. This is intended to assist the Government’s goal to deliver clean power by 2030, help cut grid connection waiting times and provide stability to raise investors’ confidence. In connection with the SSEP, NESO will develop several options to present to ministers as to how the UK energy system could look in the future.
The first iteration of the plan will be published in 2026 and will focus on electricity generation and storage, including hydrogen assets. NESO is due to publish a consultation on methodology before the end of 2024.
Next steps
With CP30 establishing that Labour’s manifesto promise of clean power by 2030 is achievable, and this pledge being reiterated in December’s “Plan for Change”, we will need to wait and see what approaches the Government proposes to take in its action plan. While each CP30 pathway requires very significant investment in offshore wind and stationary battery storage over the next few years, development of green hydrogen and CCS could also see huge boosts over and above current plans, depending on the Government’s decisions. Transition finance will be a key factor in meeting aspirations – for more analysis on how what is needed to plug funding gaps, see our article Inside the UK’s Transition Finance Market Review and our recently published global report How big is the Net Zero financing gap 2024?.
We will continue to follow these developments. In the meantime, please contact your usual A&O Shearman contact for further discussion, or the named contacts on this article.
Footnotes
1. National energy system operator launches today
2. Review GB energy system operation
3. Designation of the National Energy System Operator (NESO)
4. Clean power 2030
5. The Clean Power by 2030 is a statement of our ambition
6. AR6 - UK Offshore Wind rebounds
7. Future Energy Scenarios (FES)
8. A more responsive industrial demand could substitute a further 4GW from storage heating.
9. Generally defined as storage exceeding eight hours.
10. CP30 includes a consultation on methodologies for grid connections reform. This proposes various methods for reducing and reordering the connections queue, effecting a shift from the current ‘first-come, first-served’ approach.
11. Proposed amendments to Contracts for Difference for Allocation Round 7 and future rounds
12. New scheme to attract investment in renewable energy storage
13. Strategy and policy statement for energy policy in Great Britain
14. Strategic Spatial Energy Plan: commission to NESO