The latest crisis in the UK fuel and gas industries has brought further talk about the reliance on fossil fuels.
In recent weeks the UK economy has been hit by a double crisis in the energy industry as supply chain issues led to panic buying of fuel, while soaring wholesale gas prices caused the failure of nine energy providers in the country.
The fuel panic was created by the energy firm BP, which blamed a lack of HGV drivers for the closure of retail outlets in the country. Once that was reported in the media, the country saw queues up and down the land, which led to the military being drafted in and the government approving fast-track visas for lorry drivers.
The next flash point was a huge surge in wholesale gas prices, partly driven by a fire at a key input point from France to the UK. Gas prices surged to record highs and bankrupted the business models of some junior energy providers that failed to hedge their prices in the capital markets.
As the situation cools again, there are still fears for the supply over the winter in the UK and Europe, where Dutch futures prices also surged and saw the likes of Spain and Italy intervening to help companies.
These pressures have led to further choruses about the pace of renewable energy uptake and this article we will highlight the pace of the UK plan.
UK starts off on the road to ambitious targets
A transition is underway in the United Kingdom to meet aggressive net zero targets by 2050.
Government pressures are aligning with corporate trends to change the behaviour of investors
and companies. The pandemic saw the first annual decline in 20 years for the renewables sector in 2020, but this is likely a blip and with support from government policies, growth is expected to resume in 2021 as many of the delayed projects come online.
Renewable electricity capacity also declined in line with trends in other energy sources. The latest trends are being driven by a delay in construction and some supply chain disruption. Global financial uncertainty was another issue that impacted investor appetite.
Renewables were expected to bounce back in 2021, with most delayed projects expected to come online, providing a rebound in new installations. It is anticipated that 2022 will be a boom year with the same level of renewable capacity additions as was seen in 2019.
In the UK, wind energy is the big driver of the renewables market, and with an installed capacity of more than 57 GW in 2018, the UK is the primary producer of wind power in Europe. The
market for offshore wind energy in the UK is still expected to grow at a CAGR of more than 9% during the period of 2020-2025. In the coming years, solar PV installation in businesses, homes, and solar farms is also expected to be a big growth area.
The UK electrical system could handle up to 150GW of offshore wind, as long as essential technical integration and market reforms are delivered, according to a report by the Energy Systems Catapult.
Government policies and targets
The UK’s target for installed offshore wind has recently been raised to 40 GW by 2030 and the government will also support the development of floating wind turbines.
Offshore wind was a big winner in the UK’s latest budget, as the government announced support for major port hubs in what was label led a “big-bang moment” for the sector, as well as a competition to advance floating wind technology.
Chancellor Rishi Sunak, the UK’s finance minister announced a £75m ($105m) of government support marked a breakthrough for the Able Marine Energy Park (AMEP) project, which has for years been advancing plans for a £500m “world-class offshore wind facility” including new deep-water quays on the south bank of the Humber Estuary, across the water from Siemens Gamesa’s turbine facility in Hull and the area is well-placed to support North Sea renewables projects.
The recent surge in gas prices required support from Russia to supply further gas via Ukraine and ministers will be alarmed that the country is over-reliant on international powers. Regardless of the global trends, the UK has the ideal weather to power the likes of wind industry and self-sustainability would be a geopolitical and economic win for the country.
Renewable fuels and a petrol ban
New biofuels targets were put in place in 2018 with a goal to double the use of renewable fuels in the UK transport sector within 15 years, cutting the sector’s reliance on diesel.
The UK also previously announced that new vehicles that are powered wholly by hydrocarbon will not be sold in the UK from 2030.
The recent panic buying of fuel in the UK caused a lot of disruption and the government will have to ensure that supply can meet those same levels of demand. It is worth noting that China has planned to reduce passenger transportation by 30% into 2035 and that is something that may be implemented in the UK with a move towards more car-sharing and ride hailing services.
Conclusion
The UK government have now set their stall out and given notice to the oil industry and vehicle manufacturers that their time is up in the country. The path towards a net zero economy with no new hydrocarbon fuelled vehicles has started the ball rolling for big changes in the economy. Some are worried that the targets are too aggressive as the UK lacks the infrastructure for large-scale electric vehicle charging, while the recent gas price crisis highlights the need to ensure ample supply in the country. Nevertheless, the UK government has embarked on this path and the next years will see the renewables sector becoming more and more dominant in the UK’s energy landscape.
By Kevin George
