It’s time to get serious about a fair transition for the power sector

When taking stock of the UK’s progress towards its net zero targets, a common refrain is that many policy gaps remain on decarbonising homes, transport and industry but the power sector is making decent progress. But reflecting on the government’s ‘Energy Security Day’ last month, it’s clear we need to correct course to continue this progress and seize on the opportunity for a genuinely fair transition in the power sector.

Progress in the power sector

Up until this point, progress in the power sector can largely be attributed to two policies introduced under the Coalition government. Contracts for Difference (CfDs) for offshore wind – a contract that pays a subsidy for electricity generated when the market price is lower than a fixed price and returns it when the market price is higher – and emissions standards for power stations, which effectively phased out coal.

CfDs have continued through several governments to great effect. The cost of offshore wind between 2013, when the policy was announced, to 2022 plummeted from £118/MWh to £37/MWh and offshore wind’s share of electricity generation increased from around 7 per cent to just under 25 per cent. Similarly between 2013 and 2021, emissions standards cut the electricity from coal power stations from 39 per cent to just 2 per cent.

“Despite publishing over 2,000 pages of commitments and plans, the government’s Energy Security Day largely failed to meet this challenge”

Yet since these relative successes, the government has been struggling with phasing out gas. In its most recent report on the power sector, the Climate Change Committee (CCC) challenged the government to develop a “coherent strategy” to decarbonise the remainder of the power sector. Its analysis suggested that out of around 35GW of gas-powered generation (40 per cent of the UK’s electricity generation mix) around 14GW would need to be converted to hydrogen, 6GW to be retired and 3GW to be fitted with carbon capture and storage (CCS). This is equivalent to converting or retiring around 30 of the 46 gas-fired power stations in the UK.

Despite publishing over 2,000 pages of commitments and plans, the government’s Energy Security Day largely failed to meet this challenge. While it announced an extensive, misguided and short-termist programme to increase domestic production of gas, there is no plan yet for what will happen to existing gas power stations.

Betting on unproven technologies

Instead, the government has set out £20 billion to support carbon capture and storage but most of this will be used in industrial processes, with only one first-of-a-kind power project listed. It also has a target to generate 10GW of hydrogen by 2030 but is only just consulting over the feasibility of converting gas power stations to hydrogen, let alone setting a target for how many will be needed.

More fundamentally, neither gas power with CCS, hydrogen power stations, nor blue hydrogen (industrial manufacture of hydrogen with CCS fitted), have been proven to work in the UK and, even if they did, there are serious questions around their low-carbon credentials.

The introduction of CCS in the UK has been heralded for at least 10 years and nothing has been built at commercial scale in that time. Where CCS is being developed elsewhere, research suggests increasing capture rates beyond 90 per cent, while technically possible, may be prohibitively expensive. Current industrial manufacturing of hydrogen has a serious problem with methane leakage even if CCS were fitted to produce ‘blue’ hydrogen. If gas power stations are converted to hydrogen and depend on these methods, we risk simply swapping one high-carbon fuel for another.

These issues are why a coalition of academics and green groups spoke out against the government’s plans, particularly for CCS, on Energy Security Day. If the technology isn’t really low-carbon, and none of it has even been built yet even after a decade of promises, it is easy to sympathise with the argument that CCS is just a distraction from getting on with decarbonising the power sector.

The UK as a ‘cautionary tale’

Where policies to ramp up offshore wind and phase out coal are success stories from a decarbonisation perspective, both are a much more cautionary tale for anyone looking for evidence of an industrial strategy that has maximised the economic benefits let alone a just transition. With the ascent of offshore wind, there have been many examples across the UK where the government had the opportunity to require developers to draw on local suppliers and expertise to build offshore wind farms. Instead, they allowed many of the components to be sourced from overseas, putting domestic companies out of business.

“it is necessary to ask whether the government is serious about deliver a fair transition away from gas power or if it intends to kick the can down road for as long as possible”

For workers in coal power stations, while some energy companies provided retraining into other parts of their energy generation portfolio, there was no coordinated government policy to support workers to find new work, jobs have simply been lost. Indeed, this unmanaged phaseout of coal power stations builds on a legacy of unjust transition with the closure of coal mines in the 70s and 80s.

And so, considering last week’s announcements, it is necessary to ask whether the government is serious about deliver a fair transition away from gas power or if it intends to kick the can down road for as long as possible. At a time when the Inflation Reduction Act in the US and upcoming support in the EU will see green industries take off, the UK is facing a cliff-edge.

The UK’s current trajectory is a sluggish rollout of CCS and hydrogen that is likely to fail both on the speed of deployment and low-carbon credentials. The result is either missing our net zero targets or a sudden and disruptive pivot to other technologies. In either case, workers’ livelihoods are likely to be affected.

Reaping the benefits of the global green race

Rather than wait for the inevitable and take swipes at state support in other countries, the UK has an opportunity to match their ambition, build on policy successes and learn from the mistakes of the past to ensure a fair transition towards high-quality green jobs of the future.

Realising this will require combining increased public investment with a green industrial strategy to deliver a more ambitious role out of renewable power including onshore and offshore wind, solar, and tidal. The commitment to decarbonisation must be matched with equal ambition to maximise the economic benefits through the creation of high quality, well-paid jobs and the sustaining of existing and building of new sectors and industries. It also requires being specific with targets for CCS and hydrogen in industrial processes. It requires being honest about the niche role these technologies will play in the power sector rather than being non-committal about the future of gas power stations. And it will require developing rigorous, genuinely low-carbon standards to which these technologies must adhere.

“above all, the government must be open and honest with unions and workers in the gas sector about any transition plans”

If these technologies cannot meet these requirements, the government must be prepared to invest more heavily in alternatives, such as ramping up capacity targets for inter-seasonal, long-duration electricity storage and green hydrogen (produced via electrolysis of water).

But above all, as IPPR’s Environmental Justice Commission has highlighted, the government must be open and honest with unions and workers in the gas sector about any transition plans. It must engage with them now, give plenty of notice about when changes may start to take place, and seek to co-develop transition plans not just with workers’ and unions’ sign-off, but with their input.

Only then, when both clarity of direction and consensus with workers are established, can we say the UK government is really being serious about a fair transition for the power sector.