Tough decisions lie ahead for the UK government as it tries to decarbonise electricity generation by 2030. Several key decisions have been made but much remains unknown, particularly on reform of the electricity market and the detail of collaboration with the EU. Ros Taylor reports.

At the end of September 2024, the UK’s last coal-fired power station shut down. For a country that once relied on coal, it was a deeply symbolic moment — and an achievement for which the previous Conservative government can claim the credit.

But the Labour government has reset the direction of policy by undertaking to decarbonise almost all electricity generation by 2030. Several very significant steps have already been taken. What has been done, and what are some of the most urgent decisions awaiting the new energy secretary, Ed Miliband?

What’s been done so far

• A bill to create Great British Energy (GBE), a publicly owned green power company that will develop and invest in renewable energy projects. GBE also has a mandate to encourage nuclear (see below) and local power projects. It will partner with the Crown Estate, which manages large amounts of land and seabed for the royal family and should attract more and faster investment in offshore wind. The headquarters will be in Aberdeen, in an effort to ensure a just transition from the oil and gas industry there. Critics say the £8.3bn allocated for GBE is not enough to make a difference, and there is little evidence it will reduce energy bills.
• Investment in carbon capture and storage (CCUS). Long-term funding is promised for two new carbon capture sites in Merseyside and Teesside, CCUS enabled hydrogen projects, and storage under the North Sea. The Green Party opposes it, deploring a ‘£22bn bung’ that will allow the fossil fuel industry to carry on emitting carbon.
• Successful offshore wind auctions, leading to 10 new projects. These had stalled because the price ceiling was too low.
• Creation of NESO. The National Energy System Operator has split off from the National Grid. Its first task is to produce a roadmap setting out the steps that need to be taken to achieve clean power, including changes to regulation and planning rules. Potentially, this could give more power to central government to overrule council objections to electricity infrastructure and renewables projects and offer new incentives for them to accept development.
• Approval of three large new solar farms, and setup of a Solar Taskforce.
• The government will not oppose legal challenges to the new Rosebank and Jackdaw oil and gas fields. Under Rishi Sunak, they had previously been approved. This has effectively stalled new fossil fuel exploration and projects in the North Sea.
• Plans to force social and private landlords to make their properties more energy efficient by 2030. In a poorly regulated sector — a Labour MP was recently found to be renting out mouldy and rodent-infested flats — this will be unpopular and challenging to enforce, particularly if there continues to be a shortage of skilled labour to install insulation, solar panels and heat pumps.

The next challenges

• The EU reset. Details are scant, but energy co-operation is one of the ambitions of the ‘reset’ in relations with the EU and could save customers money. It would make sense to first act upon the commitments and aspirations in the original Brexit agreement, including improving the efficiency of energy trading and linking UK and EU emissions trading schemes. There is also potential to collaborate on supply chains for minerals and green technologies, but as yet no forum to do this.
• Can Britain return to the North Seas Energy Cooperation, which it left after Brexit, to make progress on offshore wind, CCUS and renewable hydrogen?
• More energy infrastructure is needed, particularly interconnectors. The government must decide where they will be, and if and how to compensate the people whose views and rural peace are affected.
• Solar mandate. The European Parliament has legislated for solar panels on new builds. Will the UK do the same as part of the Future Homes Standard for 2025? Skills shortages are a problem.
• Heat pumps. The existing grant for installing a heat pump is fairly generous (£7,500 per property), but take-up has been low and installers are unhappy with the kind of training currently available. Media misinformation is another obstacle. Given these problems and the difficulties European governments have encountered, it seems unlikely that the government is ready to halt the installation of new gas boilers.
• Take-up of the Great British Insulation Scheme, launched in 2023, has been very low despite high fuel bills due to the energy crisis. What would persuade the public to insulate their homes?
• Home Energy Model. The existing system for assessing energy efficiency is due to be replaced by a Home Energy Model in 2025, which is intended to incorporate energy flexibility measures. This will have important knock-on effects on the EPC rating and therefore for any new requirement for new builds and landlords.
• Grid battery storage. At the moment, renewables generators are sometimes paid to produce less energy than they could to avoid overloading the grid. More battery energy systems are needed to manage the supply. Obstacles include lithium sourcing, planning permission, manufacturing capacity and fire risk.
• Zonal energy charging. The previous government proposed creating seven wholesale electricity market zones where energy prices reflect the quantity of power generated (for example, Scotland, with its abundant wind and hydroelectric projects, would be able to offer cheaper energy). Advocates of the scheme say it would encourage infrastructure and manufacturing to relocate to areas with cheap energy. Opponents argue it would increase bills for people in places which cannot host more renewables.
• Final investment decision on Sizewell C nuclear reactor, which has struggled to attract private finance. The government also needs to pick the bidders for the two planned Small Modular Reactors. But none of these will be on stream by 2030, the deadline for decarbonising electricity generation.
• Electric vehicles. The King’s Speech did not mention extending the charging network and expanding domestic battery manufacturing, although it had previously endorsed these plans. Sales of electric vehicles (EVs) continue to rise despite negative press coverage and the postponement of the original target to phase out petrol and diesel cars. The UK also needs to decide whether to mirror the EU’s rules of origin for EVs to avoid tariffs.
• The Conservative government ruled out decoupling the high price of electricity from fossil gas-fired power plants from the wholesale electricity market. Labour will have to conclude the Review of Electricity Market Arrangements (REMA), a potentially far-reaching reform of the electricity market rules to facilitate demand side flexibility and renewables grid integration.

Labour recently axed a £200 winter fuel payment for all but the poorest pensioners. The subsequent furore shows just how fraught decisions over energy pricing are. Difficult decisions await the government — even if some of the most important should be relatively uncontroversial.

The views and opinions in this article do not necessarily reflect those of the Heinrich-Böll-Stiftung European Union.