By David Wellard, UK Regulatory Affairs Manager, Ørsted
The British Energy Security Strategy has been getting a lot of attention since it was published at the start of April. It has signalled a clear intent to move at pace towards a new, low carbon energy mix with increased contributions from offshore wind energy and electrolytic hydrogen. Achieving the targets of the strategy, however, will require new ways of approaching problems and finding their solutions.
It is worth taking a moment to appreciate exactly what a challenge it is for a government to write an Energy Strategy paper in the current environment. The invasion of Ukraine and domestic cost of living crisis has accelerated our need for change and a move towards energy independence. However, the full range of external factors that the UK Government has had to consider is broader. The global energy supply-demand balance after the economic shock of Covid has led to enormous cost challenges for UK wholesale and retail markets. The visible impact of climate change means that the need to decarbonise is in sharper focus than ever. A unified European response towards reducing reliance on Russian gas has placed a new importance on secure and indigenous energy supply. In short, all three parts of the traditional energy trilemma - affordability, energy security, and sustainability – have individually and in combination come into focus while UK Government has been developing this paper. All against the backdrop of a wider cost of living crisis and the legacy of increased public borrowing during the pandemic. These are unprecedented times that demand bold actions.
Renewable technologies have been placed at the centre of the government’s strategy. It is a huge vote of confidence in the role that renewables will play, not only in decarbonisation, but also in supporting security of supply at an affordable price. The increased 2030 ambition for offshore wind of 50GW shows the increased desire to move at pace towards a low carbon power network. But in combination with a target of 5GW of electrolytic hydrogen by the same point in time, it is also a signal that the energy from offshore wind will need to be stored and used in new ways; this doesn’t just talk to decarbonisation of other sectors, it also talks to the role renewable power can play in increasing security of energy supply.
These laudable ambitions will only be met if we can find new solutions to integrate renewables. Even before the new strategy was published, these challenges were evident. Earlier this year, the first ScotWind auction round awarded Scottish seabed leases to over 24GW of offshore wind. This is almost double the capacity that Scotland can accommodate through a combination of their peak electricity demand and export transmission capability. Given how time consuming and costly it is to expand network capacity, there is a very clear need to find integrated solutions so that all of this additional renewable output can be used. This is not a topic only for Scotland – as a further example, we expect a similar challenge for the future leasing rounds in the Celtic Sea. This was true before the Energy Security Strategy was published, and remains the case with one new feature: the offshore wind ambition has now been increased by a further 10GW, making it even more important to find the right approach to develop, deliver, and integrate offshore wind.
At Ørsted, it is clear to us that we have to find integration solutions that involve ‘power-to-X’ technologies. The scale of renewable generation being targeted has potential to exceed the total GB electricity system demand, which means that we have to develop technologies to store or convert and use renewable energy in a different context. This includes the use of green hydrogen that can be utilised for a wider range of end use cases than simply providing electricity to the grid, and can support decarbonisation of other sectors.
A change of approach is needed, and it will require Government and industry to act:
Acceleration: The ambitions need to be backed up with enabling actions that help us to deliver at pace. That means Government using the next rounds for seabed leasing and revenue support to bring forward as many projects as possible as early as possible, and shortening consenting and permitting timelines. This is true for offshore and hydrogen projects alike – in the case of hydrogen, early support for large scale projects that have longer lead times is needed to kick start the industry and blaze a trail for the next generation of electrolysers;
Pathways: Electrolytic hydrogen and other power-to-X technologies need a clear route to becoming operational. That means Government implementing a supportive regulatory regime that removes unnecessary costs, barriers and burdens, as well as providing financial support both for capex and opex. We have seen how renewable costs reduced rapidly after support schemes were put in place, and the same can be true for hydrogen. It will also be important to identify and stimulate new use cases for hydrogen, both to accelerate decarbonisation of other sectors, and to support the business case for hydrogen production;
Infrastructure: Even with power-to-X technology supporting integration of renewables, there will be a need for investment in new and existing infrastructure. Network owners and operators need to be empowered to take investment decisions earlier, and network planning should be as transparent as possible for the industry; and
Skills and supply chain: The ambition demands dependable supply chains, as well as having enough skills and resources available to deliver. This is true for offshore wind and hydrogen, but also important in the connecting infrastructure, where network operators will be under pressure to provide technical solutions at an unprecedented scale and pace.
Achieving the aims of the Energy Security Strategy will require forging new relationships to work across sector boundaries, pushing forward new technologies and fuels, empowering the industry as a whole to move at pace, and ensuring that we learn lessons along the way. It is an ambitious strategy, but it can be realised with changes to our approach.