UK targets power from 100% renewable sources by 2035

UK Prime Minister Boris Johnson has said 100% of the country's electricity could come from renewables by 2035.

The goal -- outlined during the Conservative Party conference on Oct. 4 -- builds on the government's target to cut CO2 emissions by 78% by 2035 compared with 1990 levels and comes amid a period of stress in the UK energy system caused by rising international gas prices.

S&P Global Platts reporters assess the scale and impact of decarbonizing UK power by 2035:

Energy flows

The contribution made by renewables to UK power generation has more than doubled since 2014.

• Renewables (mainly wind, solar, biomass, hydro) accounted for 43% of the UK's 312 TWh of domestic power generation in 2020.
• S&P Global Platts Analytics forecasts renewables plus nuclear will account for 56% of UK power demand in 2026, with wind output set to double from current levels to 131 TWh/year.

The UK's single-largest source of power generation is natural gas, with demand rising in periods of low wind -- as in September, when power prices averaged over GBP177/MWh ($241/MWh) as a result.

• Gas-fired generation is forecast to account for around 33% of demand in 2026, up from 31% in 2022 under Platts Analytics' latest five-year-forecast published in August.
• UK gas-for-power use amounted to 17 Bcm in 2020. Norway supplied a third of total UK gas supply in 2020 and more than half of total imports. Qatar was the dominant LNG supplier to the UK in 2020, representing 48% of total LNG deliveries, followed by the US (27%) and Russia (12%).

All the UK's existing nuclear reactors will have closed by 2028 bar Sizewell B, with only the in-construction Hinkley Point C set to enter operation in the meantime.

• Nuclear accounted for 16% of domestic UK generation in 2020, down from 21% in 2016.
• A funding mechanism for EDF's two-unit Sizewell C project has yet to be confirmed, leaving its 3.2 GW Hinkley Point C as the UK's only nuclear project in construction.

Infrastructure

UK offshore wind costs have dropped dramatically in recent years, enabling the government to ramp up target capacities, extend concessions to far offshore sites, and contemplate floating wind technologies.

• The UK targets 40 GW of offshore wind capacity by 2030, up from 11 GW today. In December, a fourth contract for differences auction is forecast to award around 12 GW of new capacity.
• The UK also has around 12 GW of onshore wind and 14 GW of solar. Both are re-admitted to the next CFD auction, but must fight over modest funding.

De-carbonized thermal balancing plant, storage and demand response are seen as essential components of a renewable energy power system.

• Biomass generation, defined as carbon neutral, averaged 2.3 GW in the year to end-September, the vast majority of this at Drax's Selby site in North Yorkshire.
• Around 3.6 TWh/year of biogas produced from anaerobic digestion is injected into the national gas grid in the UK. This could top 50 TWh/year by the early 2030s, equal to 6% of the UK's current gas consumption.
• The UK aims for 5 GW of low- or zero-carbon hydrogen production by 2030, linked in part to a goal to capture 10 million mt/year of CO2 by then and store it under the North Sea.

Prices

UK gas and power prices have soared since the start of 2021, mostly due to tight global supply and a low-wind year. The closure of almost all the country's coal plants, meanwhile, has restricted National Grid's supply options.

• On Oct. 1, the UK day-ahead gas price was assessed by S&P Global Platts at 190 pence/therm (Eur75.80/MWh, $25.74/MMBtu), a 450% increase year on year.
• The increase in gas price has been replicated across Europe due to low storage stocks, competition with Asia for LNG cargoes, and Russian supply concerns.
• Platts assessed day-ahead baseload UK power at GBP178/MWh Oct. 1, a 305% increase year on year.
• In the UK Emissions Trading System, UK Allowance (UKA) prices hit an all-time high of GBP75.56/mt Sept. 29, as gas prices in Europe increased the pull on UK thermal generation including coal-fired power.
• UK carbon costs include UKAs and the Carbon Price Support -- a tax of GBP18/mt on CO2 emissions from electricity generation. S&P Global Platts Analytics expects the total UK carbon price to align with EU carbon prices by 2030 as the UK government may decide to scale back the CPS.