First 100 Days: Labour and The Energy Transition

In the 2024 election campaign, Keir Starmer promised to make Great Britain a “clean energy superpower” [1]. Their targets are ambitious and represent a stark change to the Conservative’s 14 years in office. To achieve these goals, the UK will need a level of energy and infrastructure development not seen since the industrial revolution.

Now that 100 days have passed since 4th July 2024 election, and the forming of the first Labour government since 2010, we review what we know, what we don’t and what we can potentially expect for Energy, Construction and the Built Environment working sectors.

Status Quo and Immediate Horizons

The previous Conservative government’s net zero Carbon (NZC) stance weakened in the final years of their tenure. In 2019, the Tory government lawfully committed to achieving net zero by 2050 and made good progress in a number of areas through a fast rise in EV sales and rollout of offshore wind [2]. However in their later years, the previous government pulled the plug on several climate related policies; such as approving the construction of Whitehaven, the first new coal mine in three decades [3] and controversially awarded hundreds of new oil and gas licenses [4]. This confused stance over time has led to a hesitance of investment into advanced, NZC energy infrastructure and projects were postponed until the election result was confirmed [5], stalling investment and growth.

The new Labour government have committed to several ambitious NZC targets, namely decarbonising the national grid by 2030, doubling onshore wind, tripling solar, and quadrupling offshore wind capacity [1]. Essentially this would require phasing out the majority, or all, of gas based power generation; which equated to a third of the 2023 energy mix [6]. On their fourth day in government, the ban of onshore wind farms was lifted, then shortly after multiple climate related measures were announced in the King’s speech, including support for the development of sustainable aviation fuels [7, 8], the UK’s last coal fired power station was also shut down at the end of September [9]. The share of electricity produced from gas in the grid’s energy mix has subtly decreased when comparing the day before the election and Labour’s 100^th day in government too, and wind produced 50% of power on the 12^th (Figure 1).

However, this doesn’t tell the full story and we can’t draw to many assumptions from to single data points, but the signs suggest that more incentive may be placed on removing natural gas as a mainstay from the grid. The intent is evident, but it will take radical investment and ramp up of projects to achieve the targets set.

Figure 1 - National Grid Energy Mix on 03/07/2024 (Left) and 12/10/2024 (Right) [6]

Labour’s Policies to Drive the Energy Transition

Great British Energy (GBE) is a publicly owned clean energy company, which will collaborate with private partners to co-invest in new technologies, accelerate the rollout of mature technologies, and scale up municipal and community energy. There is still not a clear definition yet on its role, or how it will operate. What we do know is that it will be headquartered in the centre of the UK’s oil and gas heart; Aberdeen, a fitting location for the UK’s next energy revolution. Recruitment has also started out for several key roles, including the company’s Chair: Juergen Maier [10].

Although it isn’t fully defined how GBE will operate and sit in the energy supply chain, Labour have confirmed the company will not act as a supplier itself. In a press release [11], GBE was stated to have five key functions:

1. Project Development
2. Project Investment
3. Local Power Plan
4. Supply Chains
5. Great British Nuclear

The company will take two forms of primary initial investment; £8 billion of public funding and second by an increased windfall tax on oil and gas companies (from 75% to 78%) [12]. It is likely that that GBE will take partial stakes in clean energy projects and this is how Great British Energy will produce an income for the taxpayer while delivering increased energy security and the reinvestment of profits into furthering sustainable energy projects. Based on this year’s record breaking renewable energy auctions [13]; there is not substantial need to incentivise investment for wind/solar projects. GBE should then likely be used to derisk investment into less mature/higher risk projects (i.e: CCS, H2 supply chain, Nuclear) which are likely to be key in achieving Carbon neutrality by 2050, rather than crowding out willing investors within the renewables space [14].

At the time of writing, the GB Energy Bill had passed through its 2^nd reading in parliament and was at the committee stage. Among multiple amendments requested, one is that the Secretary of State, Ed Miliband, must set out the company’s strategic priorities and lay them before parliament: So it is likely that we will be given more information on the strategy of GB energy in the near future.

Planning Reform

A key policy in Labour’s manifesto was the reform of planning systems, to enable projects to be submitted for permission and approved within much shorter timeframes. According the BBC [15], “local planning authorities meet deadlines for minor applications in only 10% of cases, and only 1% of major applications within the legal 13-week time limit”. The government’s planning and infrastructure bill outlines streamlining the planning process, unlocking development sites and accelerating critical infrastructure projects (CIPs). The bill doesn’t fully define all strategies but several have been identified in similar announcements such as; modernising and increasing staff capacity of planning committees, giving more power to local councils, allowing developments on grey belt areas, and using AI to streamline the planning process [16].

As recently as 24^th September, a proposal was released for the substantial rework of the National Planning Policy Framework (NPPF). This further outlined This outlined the governments objectives and strategies to alter the framework to support and streamline housing and energy projects etc. Some of the key policies are; prioritising brownfield development as well as identifying grey belt areas, placing a stronger expectation and responsibility on local authorities to proactively identify sites for NZC/renewable developments, reversing changes made by the previous government in 2023 that were deemed to have worsened planning development and enabling renewable developments to be proposed in sensitive areas for biodiversity and Carbon sequestration [17].  

Another key objective in the NPPF proposal, is an action plan to speed up the Nationally Significant Infrastructure Projects (NSIP) regime. Despite the purpose of the regime to be streamlining projects of national importance (i.e: energy, transport, airports etc), average durations from proposal to a decision made on an NSIP increased from 2.6 years to 4.2 from 2012 to 2021 [18]. Through measures such as pre-application services and shorter notification periods for planning inspectors, the new government aims to streamline NSIP process. The importance of streamlining these projects can be demonstrated by its obstruction to large scale solar applications. Currently the minimum threshold for a solar farm to be considered a NSIP is 50 MW, Figure 2 demonstrates how this has influenced the rate of planning applications in England for Solar projects. To avoid extra consultation and approval from the secretary of state, the majority of applications fall under the 50 MW threshold. The government’s proposal to raise the threshold to 150 MW would enable more larger scale developments, clearly indicating a desire to avoid going through NSIP planning process and the need to streamline it.

Figure 2 - Solar Farm Project Planning Applications per Year [19]

The NSIP consultation has also resulted in identifying data centre developments as CIPs, and subsequently allow them to bypass local planning requirements [20] and it is the first critical infrastructure designation since 2015 [21]. This could lead to a growth in both data centre developments in the UK and private microgrids to support them, for which RED offer turnkey design services.

A Grid Overhaul

A key reason for accelerating critical infrastructure development, is boosting the implementation of renewables and upgrading the grid to accommodate this. The grid is going  through “it’s largest overhaul in generations” [22], and the main driving forces are:

• The integration of clean energy sources, and their differing locations to traditional coal and gas power plants.
• To increase transmission around the country, to deal with new locations of energy generation and a rise in demand.
• To integrate smart technologies and allow for consumer service agreements such as demand side reduction and ancillary services.

The integration of renewable and smart technologies will enable the UK to achieve a NZC grid energy mix. The ramp up of grid infrastructure and transmission capacity will address the increasing number of areas where the grid is already reaching capacity and consumers cannot obtain a connection. The recent announcement of up to £21.7 billion investment in Carbon capture technology [23] suggests that fossil fuel based peaking plants may remain a part of the energy mix in the medium term to ease the required changes to the grid whilst reducing their Carbon impact. This may also be key if the government is to adopt local wholesale electricity pricing. Multiple bodies such as the Association for Decentralised Energy [24] have suggested benefits of restructuring the wholesale electricity market for zonal rather than national pricing. In this case, non-renewable sources of energy may be required to produce enough power to supply populously dense areas that are not near the coast or where land is too expensive (i.e: London/the South East). This is only a speculative policy change however, and there has been no indication from the government that this will be undertaken.

A further action which could have an influence on the grid is an improved relationship with the EU. The UK already shares interconnectors with European countries, and Labour have stated in their manifesto that they aim to achieve a closer post-Brexit relationship with the EU. A NZC energy system has greater reliance on co-operation with the citizen and other nations. Examples of this are consumer interactions such as demand side response and the use of interconnectors to exchange excess electricity. According to Energy UK [25], a greater UK-EU co-operation could result in 13bn savings in cost to reach the Ostend declaration target of 300 GW offshore wind capacity. Furthermore, linking emissions trading schemes will prevent unfair pricing and competition and incentivise clean energy investment. There will be a review of the Trade and Co-operation Agreement (TCA) in 2026, 5 years after Brexit [26], and it is likely we will see the UK attempt to broker a more favourable trades relationship.

Obstacles & Uncertainties 

As a newly elected administration, the government is yet to announce detailed plans to achieve the majority of their targets. As their term in office progresses, the main requirement will be to develop a robust strategy to make progress in areas highlighted as priority for energy transition. Reports by Regen [27] and Energy UK [28] have identified the necessity to develop a detailed policy implementation plan. The recommendations for such a plan include involving independent bodies to avoid political bias and updating statutory strategy and policy statement to define Carbon intensity milestone targets in future years. There has also been a chronic skills shortage for green energy projects, and closing the skills gap also requires a more robust and detailed plan [29].

The grid expansion will address the concern of matching areas of greatest renewable output with demand hotspots, although this will take time and customers may be required to wait years before obtaining a connection. A resolution to this are “bridge to grid” projects where a private primary power supply is provided from a microgrid. RED’s Energy Transition team specialises in multi-utility, NZC ready microgrids and can offer both commercial and environmental solutions. It is expected we will see growth in utility as a service projects over the next few years, as consumers look for alternatives to the utility network.

District heat networks (DHNs) are mentioned, but sparingly, in Labour’s energy transition statements. One of the reasons that grid infrastructure will need to undergo expansion is to deal with the potential electrification of heating. In addition, there will also be greater demand for air-conditioning as the average UK temperature rises as a result of climate change and increased heat waves. Scandinavian countries are an example of how the implementation of DHNs can reduce the Carbon footprint of heating sector. For example, Danish district heating systems contained almost 80% less Carbon than heat supplied by natural gas systems in 2017 (Figure 2).

Figure 4 - Carbon Intensity comparison of DHN in Denmark, EU28 set against a baseline of conventional NG Boiler System [30, 31]

With increased decentralisation of energy sources, as well as the development of energy clusters, 5^th generation low temperature DHNs represent an opportunity to decarbonise heating sector through extraction of low grade heat from sources like data centres and industrial facilities. This development further incentivises the rollout of DHNs particularly given that a 5^th generation ambient temperature district network can be coupled to heat pumps to provide both heating and cooling. The Department for Energy Security and Net Zero (DESNZ) have committed in their white paper to the designation of heat network zones by 2025 at the latest, these will be the areas identified to have the most cost-effective and feasible low-Carbon sources for the network and will likely include future enforcement for new and existing buildings and  infrastructure to connect to the network [32]. The 2025 deadline of these zone may be what is holding up reference to these systems in the government’s early statements on their decarbonization strategy.

A barrier to DHNs, as well as accelerating the planning system, is local opposition. The National Infrastructure Commission raised concerns that failure to accelerate infrastructure delivery plans in the next five years could constrain economic growth and compromise UK climate targets. There is no clarity of how to avoid these delays and there has already been friction in parliament from MPs raising concerns of their constituents against infrastructure developments in their areas. The Resolution Foundation has suggested taking responsibility out of local hands or providing residents with financial incentive for such projects.

Summary

Labour’s ambitions for achieving NZC and planning reform all point toward a ramp up in energy and infrastructure projects, and their action thus far suggests they are serious about them. Our reading from these trends are:

1. Based on its mission statement, GB Energy will provide support at the project initiation stage through investment and development. It will not compete with project managers, design contractors or suppliers. If it is successful, then investors could see much more commercially viable opportunities in the space of less mature technologies like green Hydrogen and also share the risk with the public body.
   
   
2. Planning reform is a key factor in the Government’s plans to boost growth. Not only will it improve the planning process and decrease the time from application to approval, it will enable more onshore projects in areas previously excluded (such as the grey belt). As well as this, as data centres are now officially NSIPs, it will speed up the rollout of their deployment where there is high demand due to factors such as the growth of AI.
   
   
3. If a closer relationship with the EU can be brokered in the 2026 TCA review, it could reduce procurement and customs stress for UK based companies. A closer relationship can enhance collaborative projects, reduce overall costs and increase opportunities for UK businesses to work on EU projects.
   
   
4. The grid overhaul is necessary for the UK to realise a NZC economy, and the target of 2030 will lower the scope 2 Carbon emissions of many other industries. However, the grid is likely to only become more constrained in the near future and large consumers will need to consider tapping into alternative, decentralised multi-utility microgrid options.
   
   
5. Despite the promising electoral campaign messages, and enthusiasms of early months in power, the government needs to produce a detailed and costed plan on how they will achieve their targets. Defining milestone targets for each hard-to-decarbonise sector and shortening the skills gap in green energy should be a priority.
   
   
6. In pursuit of decarbonising heating and cooling, and to take strain off the power grid, DHNs need more serious treatment in NZC plans. 5^th gen DHNs provide a new opportunity in moving towards a circular economy, enabling industrial clusters as well as large producers (such as digital infrastructure and industrial processes) to support domestic and agricultural loads in a fully integrated energy ecosystem.

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