News Release

The UK's 10-point climate action plan - what does it mean for energy?

1 minute read

Prime Minister Boris Johnson has announced the UK's new 10-point climate action plan.

Commenting, Tom Heggarty, Wood Mackenzie Principal Analyst, said: “Since his predecessor Theresa May made the commitment for the UK to reach net-zero emissions by 2050 in June 2019, policy detail about how these targets would be met has been lacking. Ahead of the rescheduled COP26 climate conference, now due to be held in Glasgow in November 2021, the UK government is now looking to reaffirm its position as a global leader on climate policy.

“The policy in the action plan that is likely to receive the most attention is the move to bring forward the ban on new internal combustion engine (ICE) vehicles to 2030 (from 2035, and before that 2040). Sales of hybrid vehicles will also be banned, but later, from 2035. Less than 10% of cars sold in the UK during 2020 so far have been battery electric vehicles (EVs). Getting to 100% will require a huge effort across the entire supply chain, as well as ensuring that enough fast charging infrastructure is available to keep all new EVs.

“Reducing emissions from existing building stock is a focus. Investing in energy efficiency is low risk, labour-intensive and relies on widely available technologies. A push to retrofit buildings will have the additional benefit of providing a near-term boost to the UK's construction industry, offsetting some of the negative economic impact of the coronavirus pandemic.

“In the power sector, the twin areas of focus appear to be offshore wind and nuclear power. The UK has already committed to raising its target of offshore wind deployments to 40 GW by 2030 (up from 30 GW previously). The wind industry will be supported by a continuation of the Contracts for Difference (CfD) and seabed licencing programs, while support available for the emerging floating offshore wind sector is on the way.

“Despite falling out of favour across most of the rest of Europe, nuclear remains firmly on the UK government's radar. The UK has one large-scale new plant under construction – EDF's Hinkley Point C – and the government is expected to give the green light to a second, Sizewell C, soon. The generation of reactors under development in the UK has been plagued by construction delays and cost overruns, while the contract awarded to EDF for Hinkley Point is significantly above the level of contracts recently awarded to new offshore wind projects. The government and EDF will be under considerable pressure to demonstrate that Sizewell C represents value for money to UK taxpayers.

“Looking further ahead, the future for nuclear in the UK may be in the development of small modular reactors (SMRs), which can be prefabricated and delivered to sites partly constructed. This, in theory, should allow new nuclear plants to be delivered at lower cost, though the technology has a long way to go before being commercially proven. To that end, the government has earmarked £525m of funding for new SMRs.

“The government is hoping that the UK will become a leader in the deployment of two crucial technologies in the fight against climate change - carbon capture, use and storage (CCUS) and low-carbon hydrogen. Several industrial CCUS hubs are already in development, and the UK is well-placed to repurpose its depleted North Sea fields to store carbon. Methane-derived hydrogen is already widely used in the petrochemicals and refining sectors. Displacing those emissions with low-carbon hydrogen is an obvious first step, but the potential use cases are much more diverse, ranging from iron and steel production to heavy duty transportation. The new plan pledges to increase funding for CCUS projects by 25% (to £1bn) and is expected to set a target of 5 GW of clean hydrogen production capacity by 2030.

“The UK's energy industry will be awaiting more detail around exactly how government will be willing to support the development of emerging technologies. There have been false dawns before (see the government cancelling its £1bn support program for carbon capture and storage (CCS) back in 2015) but these new announcements are likely to be welcomed and provide the first signs of clarity around how the UK will met its net-zero emissions ambitions.”