UK's emergency budget sets ambitious targets for energy project construction

The UK's emergency autumn budget, billed as a "Growth Plan," has set hugely ambitious goals to accelerate the deployment of new energy projects, with construction of major energy projects targeted to start by the end of 2023.

The projects include the proposed Sizewell C nuclear plant, the Cambo North Sea oil field, the HyNet hydrogen cluster and carbon capture and storage projects in the Northwest, Teesside and Humber.

Projects "will be accelerated as fast as possible, aiming to get the vast majority starting construction by the end of 2023," the Treasury said in the document.

Developers are to benefit from planning reform, regulatory reform, and faster developing and consent processes, it said.

In a significant shift for a Conservative government, the plan vowed to bring onshore wind planning policy "in line with other infrastructure to allow it to be deployed more easily in England."

Prior manifesto pledges had effectively suspended onshore wind development in England, with communities given a power of veto over applications.

The latest contract for differences auction, however, again offered subsidies for onshore wind, with nearly 900 MW awarded in July at a strike price of GBP42.47/MWh.

Platts, S&P Global Commodity Insights, assessed the UK onshore wind capture price at GBP233.95/MWh Sept. 21. The assessment has been averaging GBP214.59/MWh in the year to date.

Electric vehicle charging infrastructure rollout was set to get a boost under the plans too, though details were limited.

GBP50 billion support cost

Meanwhile the government estimated the direct costs of supporting household energy bills at GBP31 billion and for businesses at GBP29 billion for 2022-2023.

"The costs of this policy are highly uncertain, particularly in 2023-24 and 2024-25, as they are sensitive to volatile future energy prices," it said.

The costs would also be impacted by the wider action the government planned to take to help reduce energy costs.

These actions included "significant interventions in the energy market over the coming months," it said.

First, an Energy Supply Taskforce would seek to negotiate long-term agreements with major gas producers.

Second, the government would reform "the outdated market structure where gas sets the price for all electricity," moving to a system where electricity prices "better reflected the UK's home-grown, cheaper and low-carbon energy sources."

Liquidity fund

Meanwhile the GBP40 billion Energy Markets Financing Scheme, delivered with the Bank of England, would support the extraordinary liquidity requirements faced by energy firms from high and volatile energy prices.

"The scheme will provide a backstop source of additional liquidity to energy firms in otherwise sound financial health to meet extraordinary variation margin calls," it said.

Access to the funds would be limited to those making a material contribution to the liquidity of UK energy markets and who were systematically important to the UK economy.

Applications to the scheme would open from Oct. 17.

UK GROWTH PLAN 2022: ENERGY PROJECTS TO BE ACCELERATED 'AS FAST AS POSSIBLE'

Nuclear

• Hinkley Point
• Sizewell C

Hydrogen

• Hynet Hydrogen Pipeline
• INOVYN Hydrogen Storage (Hynet Cluster, NW)
• East Coast Cluster Hydrogen Pipeline
• Aldbrough Hydrogen Storage (East Coast Cluster, Humber)
• Hydrogen Electrolyser Capacity Deployment

Carbon Capture and Storage

• Hynet Cluster – CCUS cluster in the North West
• East Coast Cluster – CCUS cluster in Teesside and Humber

Oil and Gas

• Murlach Oil Field Development
• Cambo Phase 1 Field Development
• Talbot Field Development
• Affleck Redevelopment
• Victory Field Development

Offshore Wind

• Remaining Round 3 Projects
• Round 4 Projects
• Extension Projects
• Scotwind Projects
• INTOG Projects
• Floating Wind Commercialization Projects
• Celtic Sea Projects

Source: HM Treasury