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The Clean Growth Plan: meeting expectation and ambition

The Clean Growth Plan: meeting expectation and ambition

Next week Conservative party members congregate for their annual political conference. Most media coverage and political conversation in Manchester will be dominated by the party’s current political trilemma of Johnson, May, Brexit.

There will also be debate on another trilemma; one of decarbonisation, energy security and affordability, as energy policy heads into another period of further change.

According to the Committee on Climate Change (CCC), emissions from transport and the building stock are now rising, in part due to an absence of new policies and strategies. But it is also worth highlighting the continued scale of the challenge facing our power sector.

Emission reduction intensity needs to fall by 65% to below 100gCO2/KWh by 2030. Even with coal falling off the system by 2025 (recently reaffirmed by Theresa May) there remains a significant emissions reduction and generation capacity challenge.

The Clean Growth Plan (or Strategy) will be the key driver in tackling these issues, setting out how the government aims to reduce carbon emissions by 57% on 1990 levels, by 2032. Proposals are expected to cover power, heat, transport and some aspects of agriculture.

However, to say that the plan has taken a long time to be published is perhaps an understatement.

To publish or not to publish?

To be fair to hard-working ministers and officials, Whitehall has been preoccupied with Brexit, a new government and a snap general election. Politically, the UK government also needs to calibrate the plan with its backbench MPs, many of who would challenge the required pace of decarbonisation and the affordability impact for British industry and consumers.

Expectations over a publication date have already been revised several times. Over the summer, ministers gave the impression that the plan would be issued when parliamentarians returned in September. Opening the country’s first subsidy free solar farm, climate change minister, Claire Perry told guests that publication would be “very, very soon” and “in days”.

There will be understandable pressure, therefore, for ministers to be more explicit next week at their political conference in Manchester. The energy sector will pack out the fringe events and conference speeches to glean some insight as to when the plan will be out.

However, those attending conference may be left disappointed as there is another major policy initiative underway that could further impact publication. The independent review of energy costs, led by respected academic Dieter Helm, won’t report to Greg Clark until the end of October when it will set out recommendations and a “long-term roadmap” for decarbonisation options in the power sector. It would be reasonable to expect the Clean Growth Plan to be issued after the Helm Review – mitigating the risk of embarrassment for not following independent advice.

But it is worth highlighting that the plan, once published, is just the start. A period of consultation following publication is likely, whilst the CCC will also want to review the government’s proposals. Publication is just the first step. A clear plan of action may not be agreed for some time yet.

An “ambitious” plan for the future

To their credit, ministers genuinely want to make sure the Clean Growth Plan is “ambitious.”

Let’s suspend belief and imagine a long-lens photographer camped outside 10 Downing Street has snapped a memo from the business secretary, Greg Clark, to Theresa May called: ‘Principles for an ambitious Clean Growth Plan – power sector’. What might we get a peek of? In the power sector, what might “ambitious” include?

  1. Ensure the plan delivers certainty

Investors always ask for policy and regulatory certainty. Whilst the nature of our parliamentary democracy means that absolute certainty can never be delivered, it is important for the milestones and vision of the plan to be as clear as possible. If policy is going to change, for example because of affordability, we need transparent mechanisms in place to prepare investors and stakeholders sufficiently in advance.

In this context, the role of Labour is important too as a plan that secures strong cross-party support will reassure industry. In welcoming the news of the latest CFD auctions and the BEIS Flexibility Plan, there are signs the official opposition is taking a pragmatic approach.

       2. Clarify future pathway of subsidy support from government

We need to quickly fill the policy and funding gap created by terminating the Levy Control Framework (LCF) after 2020/21. This is vital to keep investment flowing and developer activity vibrant, given long project lead times and practical hurdles of building energy infrastructure.

We’ve set out a future subsidy cap during 2021-2026 for some technologies (e.g. offshore wind) but we should also set out a clear process on how to decide whether ‘mature’ technologies will have a route to market without subsidy support (i.e. onshore wind and solar).

To meet 2050 emission targets, particularly within heat, we also need to revisit Carbon Capture & Storage and whether it needs its own support mechanism.

In addition to options set by the Dieter Helm review, let’s cast the net wider and draw on the expertise of the finest minds across the energy industry - and opposition parties - to support our dedicated, but overstretched civil service, to develop future LCF spending caps and controls.

      3. Keep focused on developing smart power and flexible energy networks

Our energy networks are critical to securing a low-carbon economy. We must continue to build on the flurry of activity that has taken place since spring 2017. Supporting greater volumes of solar and wind, integrating additional system costs, and taking full advantage of smart technology to better integrate demand side response, storage and energy efficiency are all necessary to make sure emissions reduction is achieved in time.

Some policy building blocks are in place, such as our plans to support battery storage, demand side response and the potential of electric vehicle to grid power. Other key building blocks include Ofgem’s ongoing review of reforming price controls for energy networks, National Grid’s plans to simplify its balancing services products and the creation of an independent system operator.

In her first party conference speech as leader last year, Theresa May turned Conservative thinking on its head, and spoke eloquently about the “good that government can do” and the positive role that the state can play in changing lives.

Despite being politically diminished since June’s general election, the Clean Growth Plan is a real opportunity for government to ‘do good’ by proposing a plan that cuts emissions, but also positions the UK as a global leader in low carbon markets and growth.