Before we all put on our out-of-office there is just enough time for one final roundup of the latest energy policy news and what it means for clean energy innovation.

Grid connections

Getting a timely connection to the electricity grid is recognised as one of the biggest barriers to achieving our low carbon ambitions. This problem is not unique to the UK. Similar patterns are observed across the sea in the Netherlands and Germany, and in faraway markets in the US and Australia.

In Britain, there’s a substantial queue of generation and storage projects seeking a grid connection. This has exceeded 500 GW, or more than 20% the total generation capacity that is estimated to be needed to achieve Net Zero by 2050.

The National Energy System Operator (NESO) was tasked with reordering the queue to align with the Clean Power 2030 (CP2030) mission – based on which projects were deemed ready and needed.

These results have now been published, and network operators are offering connections to prioritised generators. The reordered queue tells several stories:

• More than half of the battery storage projects – amounting to 153 GW – were deprioritised. But that still left 80 GW of projects that were given a connection offer by 2035. That’s roughly twice the capacity the government expects is required for CP2030.
• There is a shortfall of 5 GW of onshore wind and 7.5 GW of low-carbon dispatchable generation (burning hydrogen, or gas with CCS) compared to the CP2030 targets.

The second- and third-order effects are still being worked out. For example, the government is proposing that the next auction of Contracts for Difference for renewables would only be open to prioritised projects.

And while it was necessary to get a handle on the connections queue, the growing tendency to rely on centralised control for managing the energy transition is not without risk. Ofgem has recently announced delays of up to a year for the upcoming Strategic Spatial Energy Plan (SSEP), with knock-on effects for the Centralised Strategic Network Plan (CSNP) and Regional Energy Strategic Plans (RESPs). Such delays are undoubtedly disruptive to the investment and business decisions that rely on them.

UK Emissions Trading Scheme

The Department for Energy Security and Net Zero (DESNZ) has confirmed that the UK ETS will be extended for a 10-year period from 2031 to 2040. Businesses will be allowed to bank allocations from the previous phase into this new one.

As the main direct carbon price signal, the UK ETS is essential for encouraging low-carbon choices across the covered sectors (electricity generation, domestic aviation, energy-intensive industries and, in the future, waste, maritime and greenhouse gas removals). We have argued for its expansion to cover domestic heating, to address the disincentive to adopt low-carbon technologies such as heat pumps.

The UK ETS is also central to UK trade with the European Union. From 2026, the EU will apply a carbon border adjustment mechanism (CBAM) on imports into the Union. CBAM charges are based on emissions intensity figures for our electricity grid that are a couple of years out of date. So, they do not reward the rapid reduction in emissions that has been achieved. Such charges would penalise UK exports to the EU and make them less competitive, so efforts to align the UK and EU emissions trading schemes are urgent.

Security of gas supplies

A new consultation from DESNZ is asking the question: how do we ensure that we can get natural gas when and where it’s needed, even as the role of gas in day-to-day economic activity declines?

It a similar idea to the ‘peak gap’ challenge that we highlighted in our Innovating To Net Zero 2024 work, and which is the focus of our next publication in the series. Register to attend our flagship event in February to learn more.

DESNZ’s consultation is particularly interested in how to make it commercially viable to operate gas infrastructure that is used less often. All the favourite policy tools are listed as possible interventions including Contracts for Difference, cap and floor, and Capacity Market.

It’s important that any such support schemes do not come at the expense of innovations that can help address the peak gap.

If you’re still energised enough for some pre-Christmas reading, the consultation is available to read here. If not, don’t worry. It doesn’t close until 18 February – ample time to respond once we’ve rung in a happy New Year.