The government today used its final King’s Speech before the next election to confirm plans for new legislation to deliver annual oil and gas licensing rounds and accelerate grid connections for clean energy projects.
As had been widely trailed, the speech set out plans for a new Offshore Petroleum Licensing Bill that would mandate the North Sea Transition Authority to undertake new oil and licensing rounds on an annual basis.
But at the same time it also reiterated Number 10’s commitment to meeting the UK’s net zero targets and boosting investment in renewables projects.
In his first opening of Parliament as monarch, King Charles said: “Legislation will be introduced to strengthen the United Kingdom’s energy security and reduce reliance on volatile international energy markets and hostile regimes.
“This bill will support future licensing of new oil and gas fields helping the country to transition to net zero by 2050 without adding undue burdens on households.
“Alongside this my ministers will seek to attract record levels of investment in renewable energy sources and reform grid connection, building on the UK’s track record of decarbonising faster than other G7 economies.”
The speech also promised new legislation to support the roll out of emerging technologies such as driverless cars and machine learning, highlighted the government’s plans for new rail connections in northern England, and underscored Ministers’ commitment to delivering new trade deals with emerging economies.
King Charles, who is expected to attend this year’s COP28 Climate Summit in Dubai next month, said the government “will continue to lead action on tackling climate change and biodiversity loss, support developing countries with their energy transition and hold other countries to their environmental commitments”.
However, previously mooted proposals for new legislation to scrap nutrient neutrality rules for housing developers and limit local authorities ability to introduce 20mph speed limits and ultra low emission zones were absent from the speech.
The proposals drew a mixed response from green groups, which welcomed the prospect of reforms to accelerate grid connections for renewables projects but slammed the plans for additional oil and gas licensing rounds as an unnecessary distraction.
The move came after reports last night from news agency Bloomberg revealed Number 10 had wanted to push through further deregulatory reforms designed to make it easier for oil and gas firms to drill in the North Sea.
But the proposals to remove some environmental assessment requirements for new oil and gas projects and limit time for public consultations were stymied when officials at the Department for Energy Security and Net Zero (DESNZ) warned they would likely result in a breach of the UK’s international climate obligations.
The government is, however, planning to move forward with plans for an annual system of oil and gas drilling licenses for the North Sea, arguing moves to boost UK production in the declining basin would help bolster energy security.
Ministers have repeatedly insisted the plans would not breach the UK’s legally binding emissions goals, explaining that two new tests will be introduced to ensure licensing rounds will only go ahead if the UK is importing more oil and gas than it is exporting and domestic production is shown to result in a lower carbon footprint than imported liquified natural gas (LNG).
But environmental campaigners and political opponents warned the tests would in no way guarantee the UK’s climate targets are met and would ultimately exacerbate the country’s reliance on fossil fuels and result in higher emissions. They also argued that the proposed legislation is unnecessary, given the North Sea Transition Authority (NSTA) has just issued a new round of oil and gas licenses.
“If Rishi Sunak was serious about cutting energy bills and boosting energy security he would be using the King’s Speech to double down on home insulation and homegrown renewables,” said Ed Matthew, campaigns director at environmental think tank E3G. “This Bill is not only unnecessary, it is blocking the legislation needed to build a cleaner, cheaper energy system. The Prime Minister is treating UK citizens with contempt as they struggle with the cost of living as he seeks to stoke culture wars ahead of the election in his desperation for votes.”
Observers argued that much of the King’s Speech, including the proposed legislation on oil and gas licenses, was designed to draw clearer political dividing lines with the Labour opposition ahead of an election that is widely expected next year.
Responding to the proposals yesterday, Labour’s Shadow Energy Security and Net Zero Secretary Ed Miliband reiterated that the Opposition remained committed to halting the issuing of new oil and gas licenses and ramping up investment in clean technologies.
“This proposed Bill does nothing to lower energy bills, does nothing to deliver energy security and is a sign of a government that is bankrupt of any ideas,” he wrote on social media platform X. “We already have regular North Sea oil and gas licensing in Britain and it is precisely our dependence on fossil fuels that has led to the worst cost of living crisis in generations. All this embarrassing stunt tells you is that Rishi Sunak is continuing with his retreat from net zero. No wonder we see consternation from so many leading businesses, and even figures in his own party, who know he is undermining our energy security and damaging our economy.”
Meanwhile, a fresh analysis from think tank Green Alliance today challenged the government’s claims that more frequent oil and gas licensing rounds would boost tax revenues and help drive investment in the net zero transition.
The report argued that oil and gas majors were investing only a fraction of their profits in the clean energy transition, while nearly 8,000 jobs have been lost across the North Sea oil and gas industry in the last decade as production has steadily declined. Moreover, tax breaks introduced in 2015-16 led to a reduction in tax revenues from the oil and gas industry, falling from £12bn a year in the early 2000s, to a net loss in 2015-2017, followed by historic lows of £1bn or less from 2017-2020.
“The average UK energy bill is twice what it was two years ago and, as the Energy Security Secretary admits, these new oil and gas licences won’t do anything to bring that down,” said Heather Plumpton, senior policy analyst at Green Alliance. “Instead, more North Sea drilling will only pump more money into fossil fuel companies, who aren’t investing in the transition to cleaner energy and aren’t going to be taxed to help fund it.
“To drive down bills and increase the UK’s energy security, we don’t need new legislation aimed at political point scoring, we need to fulfil existing plans to insulate homes and make the most of abundant and cheap renewable energy.”
However, the promise to speed up grid connections is likely to be welcomed by the energy industry, which has long warned that planning and grid connection delays are one of the main obstacles to delivering on the government’s goal of delivering a net zero emission grid by 2035. The speech comes on the same day as National Grid announced that it had updated its grid connection queue to pull forward connection dates for a host of energy storage and renewables projects boasting 20GW of capacity.
Rachel Solomon Williams, executive director at the Aldersgate Group of businesses, urged the government to focus on “delivering on its climate and environmental ambitions in the upcoming parliamentary session”.
“The proposed new mandatory oil and gas licensing rounds announced in the King’s Speech have been justified on the basis that they would support a more secure and diverse energy system,” she said. “However, there is no evidence that the commodities extracted through these new rounds would be supplied into the UK market, and therefore how they contribute to energy security or lower bills. By contrast, it is clear that domestic renewable energy production supports security and diversification directly, so we welcome the renewed commitment to attracting investment into renewables and reforming grid connections.
“Maintaining a priority focus on low carbon generation will be essential for the UK to retain credibility as an international climate leader as we approach COP28. Other nations – along with investors – are looking to the UK to deliver a consistent commitment to delivering net zero, which would be best served by doubling down on the implementation of existing carbon budget plans. In an increasingly challenging economic environment, the UK government must use the upcoming Autumn Statement to ensure the UK remains an attractive destination for low-carbon investment.”
Dan McGrail, chief executive at trade body RenewableUK, similarly called on the government to now introduce the policies and spending plans that can ensure it delivers on its commitment to “attract record levels of investment in renewable energy and speed up grid connections to reach net zero”.
“To achieve this, we’re asking the Chancellor to set out specific policies in his Autumn Statement later this mont,” he said. “The UK’s energy security and net zero goals can only be met if we have offshore wind as the backbone of our energy system. To make up for the ground lost in this year’s Contract for Difference (CfD) auction, we’re urging Mr Hunt to help the UK to regain its position as the most attractive place to invest in offshore wind, despite fierce competition from the US and the EU.”
Specifically, the trade body is calling on the government to reform the system of clean energy auctions to put maximum strike prices at “appropriate and sustainable levels”, change rules on capital allowances, so that offshore wind projects qualify for the main rate of 18 per cent, rather than the lower rate of six per cent which developers get at present, and remove the Electricity Generator Levy from offshore wind projects.
“We’re also calling for measures to attract further investment in the UK’s offshore wind supply chain and port infrastructure,” McGrail added. “There’s a global shortage of offshore wind products and services, so we have a great opportunity not only to build up our domestic market but also to export worldwide.
“There is huge public support for this. Polling shows an overwhelming majority of voters believe that the growth of green industries is important for Britain’s economy, especially among voters who are planning to switch from Conservative to Labour at the next election. A significant proportion of voters believe the Conservative Party has been less focused on unlocking investment in renewable energy than on oil and gas in the last six months, and most of these voters have a less favourable view of the Conservatives as a result.”
In related news, the Scottish Government is poised to further delay publication of its updated climate strategy until next year at the earliest, according to reports in The Herald.
The plan had been slated to appear by the end of this month and Chris Stark, chief executive of the UK’s Climate Change Committee (CCC), voiced his frustration at the latest delay.
“This is very disappointing if it’s confirmed,” he wrote on X, formerly Twitter. “We agreed to push back the CCC’s annual Scottish Progress Report to review the Scottish Government’s new climate plan – due out at the end of this year. Now it seems we’ll have nothing to review.”
The Scottish government has a target to reach net zero emissions by 2045, five years earlier than the rest of the UK, with the country having positioned itself as a major clean energy hub. However, investors have warned further policy detail is required from both the Scottish and UK government to help unlock investment in the next wave of decarbonisation projects.
Keep up to date with all the latest green business news by signing up to the free Daily and Weekly BusinessGreen Newsletters.