Sam Hollister
Head of Energy Economics, Policy, and Investment
According to consultancy LCP Delta, for the new government to reach its pledge to decarbonise the power sector by 2030, it must unblock investment barriers and ensure a coordinated approach to minimise costs.
LCP Delta welcomes the scale of ambition of the new government’s commitment to double onshore wind, triple solar power, and quadruple offshore wind. However, securing enough investment to meet these plans and ensure the right generation mix to maintain the security of supply will require strong investment signals and action on planning.
The key issues from the Labour Manifesto
Plans to reach a clean power sector by 2030 will mean that gas generation will fall significantly as the power sector decarbonises - reducing the profitability of these plants. However, analysis by LCP Delta suggests maintaining an operational gas fleet will be essential for the security of supply. Labour has outlined the need for a strategic gas reserve for this reason. LCP Delta suggests that an efficient market-based mechanism would reduce costs and could be viable through specialised Capacity Market auctions for converting gas stations.
The Green Prosperity Plan will be delivered through multiple new funds and investment vehicles, including the National Wealth Fund and Great British Energy (GBE.) Faster decarbonisation may bring challenges, for example pressure on supply chains and network infrastructure, these two vehicles have the potential to help mitigate these risks. The government will want to carefully consider the support it provides to some technologies and project types to maximise its impact and avoid crowding out private investment.
“An election has been on the horizon for a while. A new government brings the benefit of providing political stability for the next few years. The scale of ambition we are seeing from Labour when it comes to the energy transition is necessary – we can’t take risks with the climate. While Labour’s accelerated targets will be a challenge, GB Energy, in particular, is an interesting proposal that can support delivery by co-investing and crowding in private sector funding. We need to invest £430bn in decarbonising the power sector by 2050, and the State is not going to provide that level of funding, so the £8.3bn allocated to GB Energy needs the opportunity to play a pivotal role in bringing forward private investment.
“This is not all about investment; even the additional funding and new schemes outlined in Labour’s manifesto would not be enough to reach the ambitious targets if operated in isolation. All new schemes must be carefully coordinated to maximise synergies, and additional enabling steps must be taken. Planning consent and connection agreement processes are currently hindering the delivery of renewable projects. Setting out new national policy statements will therefore be crucial in speeding up the pipeline.”
