The Department for Energy Security and Net Zero is here. The Prime Minister clearly understands that the Russian-made gas crisis means that clean energy, not fossil fuels, is where energy sovereignty lies.
Net zero sceptics are wrong to cast derision on the new department. The priorities of shielding British families from erratic fossil fuel markets and passing on a better environment to the next generation can be delivered together.
Britain relies on gas for around 40% of our power, including meeting the peaks of our energy demand, but also the vast majority of our heat. This is a legacy of the dash for gas in the North Sea.
But the basin has matured, so now we are increasingly reliant on imports to meet demand. Fracking remains economically doubtful, but more importantly politically unviable.
Gas was once thought of as the ‘bridge’ to net zero; cleaner than coal but cheaper than renewables. But with Russia, the world’s gas giant, having such a huge influence over the price of Britain’s gas, we were vulnerable.
Energy security means having access to a supply of energy at an affordable cost. Thankfully, Britain chose to be an early leader in renewable energy. Wind and solar were already cheaper than gas even before Putin put his foot on the hose to drive up prices ahead of his invasion of Ukraine.
These investments have made the UK a global leader in offshore wind, and Britain was able to generate enough cheap renewable power to avoid the need for ninety-three liquefied natural gas tankers between October and February.
Even better, due to the Contracts for Difference scheme, the government’s price stability mechanism for renewables, hundreds of millions of pounds is being paid back to bill payers by wind farms.
On top of that, our zero carbon nuclear power made up for another fifty-five of those LNG shipments. Together with renewables, that’s enough zero carbon power for around half the homes in the country.
Yet despite all this investment and growth in clean energy, which is now the megatrend of the global economy, some continue to argue that net zero undermines energy security and that the new department’s title is contradictory.
“What about when the wind doesn’t blow or the sun doesn’t shine?”, they ask. “How can we stop using fossil fuels by 2035? Why should we make ourselves more reliant on China for steel and critical minerals?”
The new department shouldn’t duck these challenges, but there are compelling answers.
The energy sector and the grid operator stand four-square behind net zero. They know the intermittency of renewables is a problem for now, but it will be overcome by technological innovation and investment in flexible sources of clean power.
The current technologies are batteries (which have fallen in cost by 97% in thirty years), hydropower, and hydrogen. But there are thousands of companies out there that are testing, innovating, and investing in exciting new solutions, and competing to fill the market gap.
Likewise, policy already contains important safeguards for energy security. The Capacity Market ensures there is sufficient firm power on the grid a year and four years ahead of need. The 2035 power decarbonisation target is subject to an energy security test.
There is also no reason why gas can’t stay on the grid beyond 2035, but its emissions will need to be captured and stored. CCS is an exciting business opportunity that is being heavily invested in by the likes of Shell and BP.
Scaling up new CCS and green hydrogen industries will bring billions in investment to the UK’s industrial heartlands. It’s an economic opportunity that no government would be forgiven for missing.
The lights will not go off due to Britain scaling up clean, cheap, secure renewables.
Then there is nervousness about being reliant on steel and critical minerals from China for this green industrial revolution. (It is striking how buying steel and critical minerals from China for everything else, including our oil and gas infrastructure, computers and phones is fine.)
Onshoring and growing new industries is what net zero is all about. Take the British steel sector, which also supports the transition. It has been plagued by uncompetitive electricity prices, due to our unfavourable power market arrangements compared to European competitors. Now, the gas crisis has forced it to seek another government support package.
Wouldn’t our steel companies be better off if their electricity came from cheap renewables, rather than expensive Qatari and American gas? With demand for green steel set to rise rapidly as all of our closest trading partners decarbonise their economies, shouldn’t Britain try to capture some of the market share?
The go-slowers need to face facts. If Britain is to remain competitive in the net zero age, we need to keep our place at the forefront of the net zero transition.
Yes, significant private investment is required. But there is one thing that is absolutely clear from this winter, which has seen millions suffer due to Putin exploiting our reliance on gas for heat and power: the best bet to secure our energy supplies, cut inflation, and boost economic growth is net zero.
