The Energy Transition | Government launches call for evidence to inform changes to the Capacity Market

This week we look at the Government's call for evidence to inform potential changes to the Capacity Market, a new clean energy partnership between the UK and Scotland, an extension to the Climate Change Agreement Tax incentive scheme, and more.

Government launches call for evidence to inform changes to the Capacity Market

The Department for Energy Security and Net Zero (DESNZ) has announced it is seeking views to inform the long-term future of the Capacity Market (CM) to maintain flexible capacity and strengthen supply security, while supporting the decarbonisation of unabated gas. The evidence collected will help develop decarbonisation pathways and a long-term view of future capacity requirements.

Achieving the government's goal of a decarbonised grid by 2030 will require greater reliance on renewable energy, which can be variable in supply. The government is therefore investigating ways to ensure that the CM can continue to guarantee sufficient flexible capacity during periods of low renewable generation, while supporting the long-term phase-out of unabated gas generation.

The government's preference remains for low-carbon flexible technologies such as long-duration energy storage (LDES) and carbon capture, usage and storage (CCUS) to fulfil flexibility roles long-term. However, the call for evidence recognises that while these technologies develop towards large-scale viability, gas remains the most capable generation type to guarantee flexibility, but will continue to move towards a backup role.

To help facilitate the challenges of this transition, views are sought from across the energy industry that will help inform additional decarbonisation pathways that would allow unabated gas plants to exit multi-year CM agreements to decarbonise, including conversion to CCUS.

The call for evidence also aims to inform the development of a longer-term view of future capacity and supply requirements in line with the goal of shifting the reliance on gas to a purely backup role.

The consultation is now open for responses and closes on 10 December 2024.

UK and Scottish governments to sign agreement to boost clean energy investment

Ahead of energy secretary Ed Miliband's visit to Aberdeen this week DESNZ announced on 17 October that it is set to provide billions of pounds to support Scotland’s clean energy industry. The visit is the first since Aberdeen was selected as the headquarters for the UK’s new state-owned energy company, Great British Energy (GBE).

Additionally, the UK government will sign a new agreement with the Scottish government to enhance GBE's efforts in supporting clean energy supply chains and infrastructure. Mirroring similar partnership agreements made with public bodies in England and Wales, GBE will partner with Scottish public bodies such as Crown Estate Scotland, the Enterprise Agencies, and the Scottish National Investment Bank. These partnerships are intended to help accelerate the delivery of Scottish clean energy initiatives, as well as maximising their impact and value for money.

The UK government has also outlined support for oil and gas workers transitioning to careers in renewable energy, including offshore wind, through the introduction of a "skills passport". Overseen by RenewableUK and Offshore Energies UK and supported by both the UK and Scottish governments, the initiative aims to align standards, recognise transferable skills, and outline suitable alternative career pathways for the existing energy workforce.

Ed Miliband commented ahead of his visit: "Scottish energy workers will power the United Kingdom’s clean energy future- including in carbon capture and storage, in hydrogen, in wind, and with oil and gas for decades to come as part of a fair transition in the North Sea".

UK government extends Climate Change Agreement tax incentive scheme

Following a government consultation, the Climate Change Agreement scheme has been extended for an additional six years and will provide an estimated £310 million of support annually to energy-intensive industries to reduce their emissions and improve energy efficiency.

The scheme sets energy reduction targets for businesses and offers tax incentives to those that meet relevant milestones. The targets are focused on increasing businesses' energy efficiency and reducing direct (Scope 1) and indirect (Scope 2) emissions. If the targets are met, businesses will receive a discount on the Climate Change Levy (CCL) within their energy bills. Relevant targets are customised for various sectors, including for retail, plastics management and vehicle manufacturing.

In 2020 the government extended the scheme, which was originally due to end in 2023, until March 2025. This further extension by the DESNZ will now see the scheme have targets until the end of 2030 and provide CCL reduced rates until March 2033. DESNZ states that extending the scheme will give over 2,600 UK businesses across more than 50 sectors long term certainty to plan and invest in decarbonisation projects.

Energy experts appointed to deliver clean power 2030 mission

The UK government has announced the appointment of eight leading industry and academic experts to the Clean Power 2030 Advisory Commission, a new group aimed at accelerating the transition to clean power by 2030. The commission will support Chris Stark, head of Mission Control, in developing the Clean Power 2030 system and delivering the Clean Power 2030 Action Plan, which is expected to be revealed in more detail later this year.

The action plan will outline the steps needed to decarbonise the electricity grid, aiming to protect consumers from volatile gas prices and enhance Britain’s energy security. The eight commissioners bring combined experience across energy policy, environment, industry and academia. They will provide expertise in various areas, including planning, infrastructure, nature and supply chains.

Commissioners:

• Nick Winser: Former CEO of National Grid and President of the European Network of Transmission System Operators for Electricity.
• Tim Pick: The UK’s first Offshore Wind Champion with over 25 years in the energy sector.
• Juliet Davenport: Founder of Good Energy and President of the Energy Institute.
• Robert Gross: Director of the UK Energy Research Centre and Professor of Energy Policy and Technology at Imperial College.
• Craig Bennett: Chief Executive of The Wildlife Trust and former CEO of Friends of the Earth.
• Jo Coleman: Board member of several energy organisations with 35 years’ experience in the energy industry.
• Lucy Yu: CEO and founder of Centre for Net Zero, Octopus Energy Group’s not-for-profit AI and data-driven research institute.
• Dr Simon Harrison: A leading individual in public policy on energy transition and decarbonisation, and Fellow of the Royal Academy of Engineering.

Energy secretary Ed Miliband, who chaired the commission's first meeting, emphasised that:

"The best way to take back control of our energy security and create highly skilled jobs is to speed up the rollout of renewables and transition towards clean homegrown power."

Chris Stark expressed similar enthusiasm for working with the commissioners to identify opportunities and overcome obstacles in achieving a clean power system by 2030. He noted the potential to unlock good jobs, protect consumers and strengthen the UK’s energy security.

This article was written with the assistance of Joe Sandom, James Harnett and Alexander Eaton, trainee solicitors.