UK to Allow New Gas Plants, Backtracking On Clean Grid Plan

(Bloomberg) -- The UK will allow new gas-fired power plants to be built into the 2030s, watering down a previous commitment to have a net zero grid by 2035.

The government was aiming for totally clean power supply by the middle of the next decade, meaning that any gas stations would need to be fitted with carbon removal technology. Now, ministers say that new gas plants will be allowed to pollute because they will be crucial to keeping the lights on when it’s not sunny or windy. 

It’s the latest sign of climate backsliding from the Conservatives after the party delayed a ban on sales of internal combustion cars and a phaseout of gas boilers. Prime Minister Rishi Sunak has been saying for months that he would slow or abandon environment policies if they led to direct costs on consumers. The strengthened support for new fossil fuel plants is in contrast to the opposition Labour party plan that aims for a clean grid by 2030.

Pitting energy security against net zero is seen by the Conservatives as a potentially successful battle line in the upcoming election. Shadow energy secretary Ed Miliband reiterated Labour’s 2030 clean power target on Tuesday.

“We expect that a limited amount of new gas capacity will be required in the immediate term to ensure a secure and reliable system that avoids blackouts,” the government said in the consultation document. 

Under Labour, gas plants would be needed only as back up and would not be commercial for investors, Alan Whitehead shadow minister for energy security said at an event in London on Tuesday. Any new capacity would need to be low carbon, he said. 

The announcement comes as part of the second consultation on the Review of Electricity Market Arrangements, published Tuesday. The process closes on May 7 with implementation from 2025, potentially after a change in government.   

The government will broaden existing laws that require new gas plants to be built net zero-ready or able to convert to hydrogen, according to a statement. The stations will be eligible to compete in the government’s capacity auction. This year, a record price of £65 per kilowatt per year wasn’t enough to bring forward any large gas plants.

There will be a “glide path” for unabated gas to decarbonize by 2035, according to the consultation document but this is now couched with the words “subject to security of supply.”

The new gas plants must come with strict conditions to “be retrofitted with green hydrogen or carbon capture and storage in the future, to maintain the UK’s clean power leadership,” said Juliet Phillips, UK energy program lead at climate think tank E3G. “More political attention is needed to often-over looked power solutions – like long-term storage and demand side flexibility – in order to get the UK off volatile fossil gas imports for good.”

Global economies are returning to gas as a transition fuel with European nations striking new deals for liquefied natural gas that go beyond 2050. Qatar, one of the world’s largest suppliers of LNG, is seeking more export deals in Europe and Asia as it plows investment into production. The COP28 climate talks last year ended with the inclusion of a line about transition fuels that many will see as an endorsement for the long-term use of gas.

Britain aims to be a world leader in technologies like carbon capture and storage and hydrogen, Tuesday’s announcement raises questions about how achievable those ambitions are.

The UK has been pushing the idea of energy independence after Russia’s war on Ukraine sent gas prices to record levels causing one of the worst crises in decades. Fossil fuels will continue to be important with new oil and gas licenses in the North Sea a critical part of reducing the need for fuel imports, the government said. 

Germany has also recognized the need for gas to help it phase out coal-fired power plants. The nation plans to finance one of Europe’s biggest expansions of gas-fired power plants, on the condition that developers convert to hydrogen in future years with about 15 to 20 new plants possible. 

The second consultation has dropped several proposals that were controversial with the energy industry. These included an option to create different local wholesale costs known as “nodal pricing” and a separation of gas from power price-setting.

Instead, another kind of locational pricing is under discussion. This would involve different charges based on where consumers or generators are based in the country. This could incentivize generators to build closer to where power demand is, mostly in London and the South of England. 

Currently a quarter of the UK’s renewable power is generated in Scotland and then transported down to demand centers in the south. Changes to this could save consumers about £45 per year, the government said.

(Updates with details from fifth paragraph.)

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