How can the UK best encourage investment into a low-carbon, low-cost energy system while securing energy supplies for the long term?
The Business, Energy and Industrial Strategy (BEIS) Committee is currently examining the evidence that was received as part of its inquiry on financing energy infrastructure.
The inquiry was launched in the wake of investor decisions to halt work on new nuclear projects. These cancellations and suspensions illustrate the growing concerns among investors regarding the competitiveness of delivering new nuclear in the UK.
This is not the inquiry’s whole remit, however. It also looks at challenges in raising finance for renewables and energy storage, the attractiveness of the UK as a destination for energy investment, as well as the role of government in providing support and sharing risk.
Filling the ‘nuclear gap’
It's unlikely that there's any credible scenario for decarbonisation which doesn't involve new nuclear to some extent.
Nuclear provides reliable and long-term baseload power and is currently the single largest source of low carbon electricity in the UK. The Nuclear Sector Deal, announced in June 2017, sets out an ambition to reduce the cost of new nuclear by 30% before 2030, while also committing government support for research on small modular reactors (SMRs).
But the role of renewables in terms of meeting generation needs, carbon reduction targets and delivering value for money is becoming ever more prominent.
The cost of renewables has fallen faster than many predictions and are expected to continue to fall as efficiencies are found and technology develops further.
ICE believes that the government must continue to support low carbon technologies, including nuclear power as part of a low carbon energy mix, via long-term policy frameworks, support through mechanisms like Contracts for Difference (CfDs), as well as R&D funding where appropriate.
Support for storage
However, without affordable storage providing back-up capacity, the contribution of renewables in helping to replace carbon intensive fuels will be hindered.
ICE’s own State of the Nation 2018 report on infrastructure investment recommended that CfDs be extended to cover energy storage technology and be considered as part of the future repurposing of the UK’s heating network. This is particularly important when considering the growth in demand that electric vehicles will bring to the power network in the future.