Labour wants to balance oil and gas revenues with green energy expansion

Following a landslide Labour victory in the UK in early July, several changes are expected to be made to the country’s energy sector. Environmentalists hope the change of government will bring greater support for green energy projects and help curb fossil fuel activity as it moves in a different direction to the Conservative Party. However, the Labour government faces several challenges when it comes to the energy transition, including local support for energy projects and investment in transmission infrastructure.

Labour has taken power from the Conservatives in the UK for the first time in 14 years, suggesting that change is in sight. During the election campaign, Prime Minister Kier Starmer pledged support for the energy transition, opposing several pro-fossil Conservative energy choices in a bid to bolster Britain’s reputation as a clean energy superpower. In its party manifesto, Labour said: “To deliver our clean energy mission, Labour will work with the private sector to double onshore wind, triple solar and quadruple offshore wind by 2030.” It also pledged to maintain a reserve of gas-fired power stations as a backup and ensure a “phased and responsible transition” for the North Sea oil industry.

While there is great optimism in the Labour Party about the future of green energy, it is unlikely to completely abandon oil and gas, as it sees it as a key source of income to fund the expansion of the UK’s green transition. The Conservative Party has already taken a huge toll on oil and gas companies in the form of a windfall tax, imposed on oil and gas companies at a time when fossil fuel profits were soaring. The Labour government will need around $30 billion in investment to fund its green transition plans, meaning it will continue to rely on oil and gas taxes for several years to come. However, high tariffs and a lack of tax breaks are likely to deter many oil and gas companies in the coming years as they look for other opportunities to do business.

While the Labour government will continue to support oil and gas to some extent, it has big plans for the UK’s renewable energy sector. First, the Labour government will reverse the de facto ban on onshore wind introduced by the Conservative Party via two footnotes to the National Planning Policy Framework (NPPF) that required such strong evidence of a lack of local opposition that it prevented wind turbines from being built, given that there is always some form of local opposition to new energy projects. The new draft NPPF does away with these footnotes, in order to encourage more investment in onshore wind.

Labour is also considering making large wind farms “nationally significant infrastructure projects”, which would allow them to be approved by Energy Secretary Ed Miliband without having to seek local council approval. Research by Friends of the Earth has shown that using less than 3 per cent of England’s landmass for onshore wind and solar could help produce 13 times more green energy than is currently produced, and enough to power every UK household twice over.

In a policy statement, officials said: “Delivering on our clean energy mission will help boost the UK’s energy independence, save money on energy bills, support highly skilled jobs and tackle the climate crisis… That’s why we have committed to doubling onshore wind power by 2030. This means immediately ending the de facto ban on onshore wind power in England since 2015. We are reviewing planning policy to put onshore wind power on the same footing as other types of energy development under the national planning policy framework.”

However, Labour still faces several challenges on energy. There is a long delay in connecting new power projects to the grid, with some developers waiting around 15 years to produce power. To address this, National Grid announced major plans last year to expand the UK’s grid infrastructure, investing $52 billion in infrastructure. However, this has discouraged some companies from starting up, as it could take years to connect to the grid. This makes Labour’s goal of doubling onshore wind, tripling solar and quadrupling offshore wind look incredibly difficult.

Analysts at investment bank Jefferies believe that “Labor’s target of net zero emissions from the grid by 2030 appears unrealistic, even with steady progress,” while one energy expert consulted suggested that “even if the new government delivered every project on the table, had linear growth in interconnections and electricity demand at rock bottom, the country would still miss its target by 25 percent.”

There are high hopes for a green transition under Labour in the UK, after several years of slow sector growth and ongoing support for oil and gas. However, energy experts believe Labour’s green energy targets may be too ambitious in the short term, with greater infrastructure investment required to support the massive planned increase in green energy capacity.

By Felicity Bradstock for Oilprice.com

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