- Critical actions needed to speed up energy infrastructure build-out
- Supply chain bottlenecks in offshore wind to be addressed as a matter of urgency
- Clarity on frameworks and support for hydrogen and CCS is imperative.
RWE, the UK’s largest power generator, has welcomed today’s report by the Climate Change Committee (CCC) which, it says, shines a light on the opportunities and challenges the UK faces in order to achieve a decarbonised power sector by 2035.
RWE’s UK Country Chair, Tom Glover, said: “The CCC shows that a reliable, resilient and decarbonised power system in 2035 is achievable – BUT by no means guaranteed – a massive step change is required on all fronts.
The CCC has stress–tested the power system under extreme weather scenarios to determine what is required to ensure a resilient and reliable power system. Crucially, they highlight that a small amount of unabated gas generation – amounting to roughly 2% of annual generation – is necessary but compatible with a decarbonised power system. Indeed, they conclude that whilst a system without any unabated gas at all would be theoretically possible by 2035, this would increase costs and delivery risks.
2023 is a ‘make or break’ year – the decisions made in the next few months will be critical in charting our path to success (or failure). For example, as highlighted by the CCC:
- Urgent action is required to enable energy infrastructure build is taken forward at pace. Developers, including RWE, are facing many years delay in connecting their new low-carbon projects to the grid. This has to change. To this end, we support the CCC recommendation to create a Minister-led infrastructure delivery group, advised by the new Electricity Networks Commissioner. This group should not be afraid to be bold, to move the grid regulatory framework away from the current ‘as little as possible, as late as possible’ approach to a more strategic, agile network which makes more efficient use of existing connections and builds the grid quickly and in anticipation of need.
- The report heralds offshore wind as the ‘backbone’ of a decarbonised energy system; yet notes that to achieve the necessary deployment implies annual build rates around 40% higher than emerging data on the 2022 peak. RWE fully support the recommendation to identify and address key supply chain bottlenecks for delivering up to 50GW offshore wind by 2030. The UK lacks a clear strategy for industrial scale growth of the UK offshore sector, with huge required investments in ports and manufacturing facilities if the UK is to retain its position as word-leader in offshore. To this end, the government should step up and provide direct support and incentives, e.g. via tax credits, state-backed investment guarantees, and targeted funds for construction of UK-based manufacturing facilities and UK port infrastructure. In addition, we would advocate reform the Contract for Difference (CfD) scheme, away from a ‘race to the bottom’ approach to a ‘hurdle based’ CfD that guarantees a contract, as long as developers meet or beat a target hurdle price. In addition, we should move away from the current approach of relying on individual developer supply chain commitments in the CfD, to a collaborative industry framework through, for example, a developer-levy used to fund sector-wide supply chain investments.
- The report outlines the important role of gas carbon capture and storage (CCS) and hydrogen as low-carbon back-up capacity. However, there is considerable uncertainty over the role of hydrogen in the wider economy and there is a risk that Government targets for hydrogen production capacity by 2030 could be insufficient. We would echo the recommendation to finalise funding mechanisms and allocate funding to support the development of 10 GW of low-carbon hydrogen production by 2030 and to fast-track the development of new business models for hydrogen transportation and storage infrastructure. RWE has a target to develop 2GW of green hydrogen production across our core markets, including the UK by 2030 – scaling up to GW-scale onshore and offshore hydrogen production in the 2030s. However, we do not have the necessary framework in place to support investment – in particular we would urge clarity on the regulatory framework for offshore hydrogen production, transportation and storage.
- RWE is actively exploring ways to decarbonise its gas fleet, our target is for the first of our fleet to be converted to decarbonised operation before 2030. This ambitious timeline requires significant investment, strong policy and regulatory support, and major new national infrastructure to be in place. We therefore fully support the recommendation to de-risk the future Carbon Capture and Storage project pipeline by launching the next cluster selection process as soon as possible. We would go further and say that the Government’s Industrial Cluster Decarbonisation Sequencing Programme could be expanded to support more than two clusters as part of Track 2, in order to rapidly increase the scope of hydrogen and CCUS and maximise decarbonisation opportunities and ‘green jobs’ across length and breadth of UK.”