Ofgem risks ‘undermining net zero’, says energy sector report

Energy regulator Ofgem risks undermining the transition to net zero by “underestimating the scale and pace of investment needed” in upgrading the energy grid, says a report by an energy trade association.

The Prospectus for Onshore Wind report by RenewableUK also says that at present, the UK is approving less than half (49%) of the annual capacity needed to reach the goal of installing 35 gigawatts (GW) of onshore wind by 2035, as recommended by the Climate Change Committee. 

The report, presenting itself as an offer from the onshore wind industry to the UK and devolved governments, says that the UK is installing an average of just over 600 megawatts (MW) a year, when it should be installing 1,250MW a year to stay on track.

It argues that doubling the UK’s onshore wind capacity to 30GW by 2030 - up from 13.8GW today - would reduce consumer bills by £16.3bn over the course of this decade, as well as generating £45bn of economic activity.

In order to achieve this, the trade association proposes the introduction of annual contracts for difference (CfD) auctions to stimulate more investment, reforming the planning systems in all four UK nations so that the need to tackle climate change is enshrined in regulations, and “reforming Ofgem so that it sharpens its focus on net zero”.

“We’re concerned that Ofgem is underestimating the scale and pace of investment needed”, reads the report, continuing that “this risks undermining the transition to net zero. Ofgem should be putting net zero at the centre of every decision it makes, not least because this will achieve decarbonisation at the lowest cost to consumers. We need a new approach to how we plan and invest in a smart, net zero grid”.

Responding, an Ofgem spokesperson said that Ofgem’s remit sets out its duty “to protect consumers now and in the future, including their interests in reducing greenhouse gas emissions”, and that it is committed to helping to decarbonise the economy at low cost to energy users.

The spokesperson added that decarbonisation is “fully incorporated” into the regulator’s work programme, and pointed to the Decarbonisation Action Plan the regulator published last year.

However, Dr Simon Cran-McGreehin, head of analysis at the non-profit Energy and Climate Intelligence Unit, agreed that “it’s important that regulations and planning rules are aligned with our net zero ambitions, supporting innovations such as upgrading onshore windfarms with the latest technology”.

Commenting on the report, the chief executive of EDF Renewables, and chair of RenewableUK’s Onshore Wind Steering Group, Matthieu Hue, said that the report “makes a clear offer to government that the industry is standing ready to work with ministers to maximise growth in the UK’s supply chain, inward investment, and exports”. 

He continued: “As it’s one of the cheapest ways to generate new power, onshore wind will reduce energy bills for consumers who are being hit hard by massive increases in gas prices.”

Asked for comment on the report’s findings, a spokesperson for the Department for Business, Energy and Industrial Strategy (BEIS) said that “latest figures indicate we now have over 14GW of onshore wind capacity installed in the UK, enough to power over 10m UK homes”, adding that onshore wind projects will already be able to compete in the next CfD allocation round. 

The spokesperson continued that while targets can be “useful” in giving certainty to sectors with long investment horizons, BEIS does not believe that government should prescribe the proportion of generation that will come from all specific technologies.

Rather, the department believes the role of government should be to enable the market to deliver the levels of deployment required.