Photo: Illustration; Source: North Sea Transition Authority (formerly Oil and Gas Authority)

UK plans to ensure energy independence by scaling up renewables while maximising North Sea production

In light of the war in Ukraine and amid rising concerns over energy security, the UK government has moved to strengthen its energy security through a new strategy announced by the government late on Wednesday, committing to support oil and gas projects in the North Sea and speed up the deployment of renewable energy sources.

The government’s British Energy Security Strategy sets out how Great Britain will accelerate the deployment of wind, new nuclear, solar and hydrogen, whilst supporting the production of domestic oil and gas in the nearer term – which could see 95 per cent of electricity by 2030 being low carbon.

The strategy will also see a significant acceleration of nuclear, with an ambition of up to 24GW by 2050. This would represent up to around 25 per cent of the nation’s projected electricity demand. In order to bring forward new projects, a new government body, Great British Nuclear, will be set up immediately. The UK will also launch the £120 million Future Nuclear Enabling Fund this month and work to progress a series of projects as soon as possible this decade.

When it comes to oil and gas, a licensing round for new North Sea oil and gas projects is planned to launch in Autumn, with a new task force providing bespoke support to new developments. With this decision, the government said it had recognised the importance of these fuels to the transition and to its energy security, and that producing gas in the UK has a lower carbon footprint than imported from abroad.

The UK’s plan related to offshore wind includes a new ambition of up to 50GW by 2030, which the government estimates is more than enough to power every home in the UK. Of this total amount, the UK said it would like to see up to 5GW from floating offshore wind in deeper seas. This will be underpinned by new planning reforms to cut the approval times for new offshore wind farms from 4 years to 1 year and an overall streamlining which will radically reduce the time it takes for new projects to reach construction stages while improving the environment.

The UK will also look to increase its current 14GW of solar capacity which could grow up to 5 times by 2035, consulting on the rules for solar projects, particularly on domestic and commercial rooftops.

Moreover, the UK will aim to double its ambition to up to 10GW of low carbon hydrogen production capacity by 2030, with at least half coming from green hydrogen and utilising excess offshore wind power to bring down costs.

The Prime Minister, Boris Johnson, said: “We’re setting out bold plans to scale up and accelerate affordable, clean and secure energy made in Britain, for Britain – from new nuclear to offshore wind – in the decade ahead. This will reduce our dependence on power sources exposed to volatile international prices we cannot control, so we can enjoy greater energy self-sufficiency with cheaper bills.”

This plan comes in light of rising global energy prices, provoked by surging demand after the pandemic as well as Russia’s invasion of Ukraine. As a response to the war in Ukraine, the UK in early March decided to phase out imports of Russian oil by the end of the year.

The phasing out is said to allow the UK more than enough time to adjust supply chains, supporting industry and consumers. The government will work with companies through a new Taskforce on Oil to support them to make use of this period in finding alternative supplies.

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The country’s new energy security strategy will be central to weaning it off expensive fossil fuels, which are subject to volatile gas prices set by international markets and to “boosting our diverse sources of homegrown energy for greater energy security in the long-term.”

The government emphasised that the strategy will also increase the number of clean jobs in the UK by supporting 90,000 jobs expected in offshore wind by 2028, which is 30,000 more than previously expected; 10,000 jobs in solar power by 2028, which is almost double compared to previous expectations; and 12,000 jobs in the UK hydrogen industry by 2030, which is 3,000 more than previously expected.

Business and Energy Secretary, Kwasi Kwarteng, said: “The simple truth is that the more cheap, clean power we generate within our borders, the less exposed we will be to eye-watering fossil fuel prices set by global markets we can’t control. Scaling up cheap renewables and new nuclear, while maximising North Sea production, is the best and only way to ensure our energy independence over the coming years.”

Following the strategy announcement, energy consultancy group Wood Mackenzie said the UK’s demand for oil and gas will continue to outstrip supply but there are wide ranges of uncertainty. In 2030, production will be between 0.6 million barrels of oil equivalent a day (mmboe/d) and 1.6 mmboe/d; the range for demand is even wider, according to WoodMac.

Neivan Boroujerdi, Research Director, North Sea Upstream for Wood Mackenzie said: “By 2050, UK North Sea production will have largely ceased. But even in a net-zero scenario, demand will persist with emissions being offset by carbon capture and storage (CCS) and nature-based solutions. Current levels of production could be maintained for the next decade, underpinning energy security and safeguarding jobs. But the UK is sorely lacking in gas and will be heavily reliant on imports in all scenarios.”

Source: WoodMac

WoodMac also said that greenfield projects like Cambo and Rosebank offer the most immediate upside, but some require finance or a change in ownership. As recently reported by Offshore Energy, the controversial Cambo project – led by Siccar Point in partnership with Shell – has received a licence extension from the UK authorities.

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Offshore Energy has also recently reported that Equinor is working to mature and improve its operated Rosebank project off the Shetland Islands.

Boroujerdi said that new developments are compatible with the UK government’s target of reaching net-zero by 2050. “But while UK oil and gas has lower carbon intensity than some alternatives, high prices look set to extend output from late-life infrastructure, meaning emissions reduction goals will become harder to meet,” he said.

“Continued decarbonisation of the shelf – including electrification – is required to ensure alignment between energy security and a net-zero future,” Boroujerdi added.

It is worth noting here that the FPSO which is considered to be used for the Rosebank project was constructed to allow the power-from-shore option.

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UK ‘taking control of its energy future’

The launch of the UK’s energy security strategy has been welcomed by many industry players.

Duncan Clark, Head of Region UK for offshore wind developer Ørsted noted: “Twenty years ago there were only two wind turbines in UK waters, and now, as a nation, we are leading the world in offshore wind and making the changes we need to make offshore wind the backbone of the UK’ electricity system.”

Deirdre Michie OBE, Chief Executive of Offshore Energies UK, said: “We are pleased that the government’s strategy recognises the vital role of the UK’s offshore energies sector in supporting energy security and the transition to net-zero. It will be crucial to ensuring our 2050 Paris Agreement climate commitment stays on course.”

Clare Jackson, CEO of Hydrogen UK, welcomed the government’s decision to double down on hydrogen, recognising that hydrogen is a key part of the net-zero transition.

Shell CEO, Ben van Beurden, said: “Shell is ready to play our part. We plan to invest up to £25 billion in the UK energy system over the next decade subject to Board approval, and more than 75% of this is for low and zero-carbon technology. Offshore wind, hydrogen and CCS will all be critical but we need the right policy frameworks in place.”

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Following its appeal against a Dutch court climate change ruling, Shell has recently emphasised the role of governments in balancing the need to address climate change and ensuring a secure, reliable, and affordable supply of energy.

EDF’s UK CEO, Simone Rossi, said: “Britain is right to take control of its energy future, with a step-change in ambition for electricity from wind, nuclear and solar, and greater energy efficiency.”

Meanwhile, the European Union has banned Russian vessels from its ports but it is still weighing additional sanctions related to the banning of Russian oil imports. The European Commission President, Ursula von der Leyen, said earlier this week the EU was reflecting on some of the ideas presented by the Member States, such as taxes or specific payment channels such as an escrow account.