Record policy announcements affecting the clean energy sector

Offshore Wind and floating offshore wind (“FLOW”)

The government aims to develop up to 50GW of offshore wind by 2030 and views FLOW as the “next frontier” in this development. To this end, the government has launched a £160 million Floating Offshore Wind Manufacturing Investment Scheme (FLOWMIS) to build UK port infrastructure, which industry participants agree will be key in spearheading the development of this industry. For more information on the FLOWMIS, please see here: Building UK Port Infrastructure to unlock the floating wind opportunity | Foot Anstey

As members of the Celtic Sea Cluster, we recognise the size of the opportunity that FLOW presents for the UK economy as a whole, for energy security and as a way for the UK to showcase thought leadership. We also recognise the challenges posed, in terms of the size of the infrastructure required, the length of delivery of the projects, supply-chain management and skills gaps in the sector. There are also challenges around the permitting regime, which are underpinned by, amongst other things, considerations on the potential impact of the floating offshore wind structures to the ecology; something that is not as easily assessed as compared to traditional offshore wind turbines.

EVs

In the theme of decarbonising transport, the government has announced a £350 million investment in electric vehicle charging infrastructure and published a final consultation on the Zero Emission Vehicle (“ZEVs”) mandate. If imposed, the mandate would require manufacturers who produce over 2,500 vehicles per year to ensure that an increasing percentage of new car and van sales are ZEVs from 2024. Manufacturers who do not meet the threshold of 2,500 vehicles will not be subject to ZEV targets until 2030.

We have highlighted some of the key points of the consultation below:

• Trading scheme: The scheme is intended to encourage manufacturers to shift production towards ZEVs, with manufacturers receiving allowances to sell non-ZEV vehicles up to a given percentage of their fleet. Non-ZEV sales in excess of a manufacturer’s allowance must be covered by purchasing allowances from other manufacturers who have managed to exceed their ZEV targets. Where minimum targets are still not complied with, the consultation proposes that manufacturers must pay a penalty consisting of £15,000 per non-EV car and £18,000 per non-ZEV van sold in excess of the minimum target.  
• ZEV target trajectories. There are proposed minimum targets for ZEV car sales and these are set at 22% in 2024, 38% in 2027, 80% in 2030 and 92% in 2033 100% in 2035 (though the legislation governing the targets from 2031 onwards is set to be introduced at a later date). For manufacturers who manufacture fewer than 2,500 vehicles per year, the ZEV targets will not apply until 2030.
• Non-ZEV C0₂ standard: The consultation proposes a new CO₂ emissions standard for new non-ZEV vehicles sold from 2024 onwards to ensure they do not become less efficient and more polluting over time.

The consultation closes on 24 May 2023, with the government aiming to publish a summary of responses, including next steps, by 24 August. The finalised policy is scheduled to take effect from 1 January 2024.

Assuming that the proposals are implemented as set out in the consultation, we would expect an uptake in the number of ZEVs in the next few years, which could include hydrogen fuel cell vehicles, alongside battery electric vehicles. The development and uptake of hydrogen fuel cell vehicles will require considerable investment in the hydrogen refuelling technologies.

Heat

As detailed in the ‘Energy Security Plan’, the government has set an ambitious target to reduce final energy demand from buildings by 15% by 2030. Given that the UK’s housing stock contributes up to 58.5 million tonnes of CO2 each year, with 26% of total UK emissions produced by residential households, the built environment presents a significant opportunity for decarbonisation. In order to achieve its targets, the government is pursuing an integrated programme, which includes the replacement of fossil fuel heating with clean heat alternatives.

The programme is underpinned by £6.6 billion of public spending, with a commitment to provide a further £6 billion for the period of 2025 to 2028 which the government believes will drive investment into low carbon technologies such as heat pumps and heat networks by stimulating private investment, galvanising supply chains and improving public and business engagement with energy efficiency.

On the subject to heat pumps, the implementation of the Clean Heat Market Mechanism in 2024 is intended to incentivise heating system manufacturers to deploy heat pumps as a proportion of fossil fuel boiler sales. The government has also committed to installing over 600,000 heat pumps per annum by 2028 and has launched a £30 million Heat Pump Investment Accelerator Scheme to ensure that heat pumps are manufactured at a faster rate than ever before.

In order to ensure the continued growth and decarbonisation of the UK heat network, the government has confirmed that the capital support underlying the Green Heat Network Fund and the Heat Network Efficiency Scheme will be extended to 2028, including £220 million for the Heat Network Transformation Programme over 2025/6 and 2026/7. The Government is intent on delivering a neighbourhood hydrogen heating trial and village scale hydrogen heating trial by 2024 and 2025 respectively, as part of research into the role that hydrogen can play in heating.

The residential developer sector is monitoring these developments closely, in an effort to anticipate the changes that are going to be introduced following the Energy Security Bill coming into force in 2024, in particular OFGEM taking on the role of regulating all heat networks, upon these becoming operational.

Our “Residential Development: Road to Net Zero” training event taking place in Plymouth on 27 April 2023 will look into this and similar themes in more detail.