UK Energy Transition post-COVID-19 and Brexit

By Elena Campbell
24/02/2021

The current COVID-19 pandemic coupled with the end of the Brexit transition period has left the majority of sectors in the UK to deal with disruption and uncertainty - not least the energy sector. We know that the road to economic recovery is paved with questions about employment, sustainability, resilience and fairness. But it also presents an opportunity to take advantage of the sector’s strategic importance. So how can the UK’s energy sector develop a long-term, sustainable vision to transition through the pandemic and a post-Brexit world?

A ‘Green Recovery’

The UK is currently leading in the race to decarbonisation by 2050. Overall, emissions have decreased by 40% since 1990, more than any other advanced economy. This means the UK is well placed to achieve a green recovery from the pandemic. Large-scale, long-term energy solutions will be key to this success, two main components of which include carbon capture usage storage (CCS) and hydrogen.

CCS is widely viewed as critical in achieving net zero, including by those at the top of government. The March 2020 budget confirmed that £1 billion will be invested into the CCS Infrastructure Fund to support four industrial clusters that aim to be operational by 2030. A new UK North Sea CCS consortium is underpinned by a partnership between BP, Eni, Equinor, National Grid, Shell and Total, with BP as the operator to develop offshore carbon dioxide transport and storage infrastructure in the North Sea. This infrastructure will service the Net Zero Teesside and Zero Carbon Humber, the UK’s first decarbonised industrial clusters, aiming to kick-start the decarbonisation of industry and power by 2030. Such projects are positive news for increased job creation in the North of England, fundamental to both a post-pandemic recovery and the UK Government’s ‘levelling up’ agenda.

Hydrogen has also seen public investment. The UK Government’s Ten Point Plan includes a £240 million Net Zero Hydrogen Fund which could generate around 8,000 jobs in industrial heartlands and beyond. A UK Hydrogen Economy also provides numerous options for decarbonisation across industry, transport, buildings and power generation. This integration would enable sector coupling, connecting the energy consuming sectors with the power producing sector. 

Enhancing the UK energy sector’s integration supports a successful green recovery. What remains is to ensure the shift from planning to delivery.

Future EU-UK energy relations

Although the UK has left the EU and made clear its intentions to have limited UK-EU regulatory alignment, energy relations will remain. In December 2019, the EU presented its European Green Deal which will affect Britain’s markets, trade and global climate policy position. UK and EU energy security issues will remain closely aligned, not least because of geographical positioning. Ignoring European climate policy developments might have consequences. Electricity interconnectors illustrate this point as well as providing opportunities for the UK’s renewable energy market.

Interconnections linking national electricity systems provide an option for a low carbon electricity grid. A policy paperstarted to outline a framework for future electricity trading across interconnectors between the UK and the EU, with the agreed model of trading expected sometime in 2021. A different policy recommendation proposes increasing the future UK energy system’s interconnection capacity to benefit from the renewable energy supply from other countries. This in turn would limit the potential for UK dependency on electricity imports from the EU. Given the clear position that there will be no regulatory alignment with the EU, this could be a good option.

Looking Forward

A successful green recovery from the pandemic combined with strong post-Brexit climate policies could solidify the UK’s position as a global leader in the energy transition opportunity. Now that the UK has left the EU, there is significant scope to forge future relationships between business, government and policymakers to collaborate and build a more resilient energy sector to support society in the post-crisis period.

Brexit should not affect the UK’s climate goals which were established at a national level under the Climate Change Act 2008. Look out for part two of this energy transition series, which will provide an in-depth look at Britain’s climate goals ahead of COP26.

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