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Energy transition must embrace cross-sector cooperation

I was appointed Minister of State for Energy in July 2019, only a few weeks after the net zero bill was passed. As everybody knows, this put the target of net zero by 2050 into law.

Net Zero affects every policy across the energy space. It affects power generation, as well as other areas such as domestic heating.

It was obvious that no single technology could provide the answer to reaching net zero in the UK by 2050. Even if there were, we cannot know in 2024 what the best mix will be by 2050. For the time being, we have to try a range of technologies, allowing them space to grow and develop.

It is clear to me that we needed to look at the strengths and peculiarities of the UK energy landscape. We have a balanced mix. Unlike the Germans, we were not overly reliant on gas, particularly from Russia. Unlike the French, we were not too reliant on nuclear power.

For power generation we use gas, offshore wind, onshore wind, nuclear and a residual amount of coal.

The reduction of our consumption of coal has probably been the greatest success of energy policy. As late as 2012, 40% of the electricity we generated derived from coal. At the beginning of 2024, that figure is generally around 1.5%.

Group of windmills and solar panels for electric power production and oil rigs on coast.
Group of windmills and solar panels for electric power production and oil rigs on coast. Shutterstock.

The North Sea is a fundamentally important part of our energy mix. Over the past 50 years it has driven the creation of hundreds of thousands of regional jobs. It has also been an enormous economic benefit to the United Kingdom as a whole.

There are significant opportunities for new technology. Offshore wind has taken off. The manufacture of wind turbines, nacelles and monopiles represent a promising field for economic development.

The challenges faced by UK manufacturing are well known. With regard to offshore wind, we did not secure enough of the supply chain, despite the successful development of offshore wind. The increasing costs of inputs, as well as the increasing costs of energy, have also put pressure in British manufacturing.

Ministers in the future, as I tried to do, will put pressure on industry to have at least 60% of supply chain content in the development of offshore wind located in the UK. This has proved challenging. It would appear also that the Chinese have stolen a march on their competition in this field.

If levelling up means anything, it means greater support for our manufacturing base. This could come in the form of subsidy or support in energy. German manufacturing strength has famously been built on the back of cheaper subsidised energy for industrial purposes.

I think there is an understanding within the broader energy sector that oil and gas, offshore wind, solar and biomass professionals are all committed to a similar process of decarbonisation. But there is still a long way to go, in my view, before full cooperation exists between various parts of our energy landscape.

I have always been struck when talking to colleagues around the world how often they referred to our policies with regard to renewables and carbon capture. The CfD process (Contract for Difference) has been widely observed throughout the world as a way of attracting investment in new technologies.

It was in this spirit of cooperation between government and the private sector that our North Sea Transition Deal was conceived. The process of getting to the deal involved many conversations with Tim Eggar and Andy Samuels of the Oil and Gas Authority, now the North Sea Transition Authority.

People like Deirdre Michie from Offshore Energies UK were closely involved in dialogue with the government, and there were many others with whom I engaged from the sector. It was this constant dialogue with the sector that, in my experience, led to the best policy outcomes. 

The principle of the deal was that any government support for the industry could only be granted if the industry itself managed to reach ambitious targets in reducing and mitigating carbon emissions.

Then Secretary of State for Business, Energy and Industrial Strategy Kwasi Kwarteng, with Nigel Cann, Delivery Director, Hinkley Point C, during a visit to Hinkley Point C nuclear power station construction site in Somerset in 2022. Finnbarr Webster/PA Wire

Published in March 2021, the North Sea Transition Deal will harness the power of the UK offshore oil and gas industry to deliver net-zero by 2050. This process could unlock up to £16bn in investment and secure up to 40,000 additional energy jobs. Crucially, it will help to reduce emissions by up to 60million metric tons by 2030.

It simply isn’t realistic to shut down the North Sea at one stroke. Hundreds of thousands of jobs would be jeopardised. We would be reliant on the importation of gas, compromising our energy security. Such a drastic move simply wouldn’t make any sense.

Cross-sector cooperation is also an important component of the deal. To this end, the offshore oil and gas sector is developing a passport to make it easier for workers to move between oil and gas and offshore renewables.

I think there is an understanding within the broader energy sector that oil and gas, offshore wind, solar and biomass professionals are all committed to a similar process of decarbonisation. But there is still a long way to go, in my view, before full cooperation exists between various parts of our energy landscape.

One of the difficulties in the relationship between government and the energy sector has of course been the Government’s general commitment to raising tax revenue. I was publicly against the Energy Profits Levy (EPL), otherwise known as the windfall tax. Although I understand the reasons for it, I do think it makes cooperation between the government and the industry a little more challenging.

Compromise and dialogue are essential in the fight against climate change. I was fortunate to attend COP28 in Dubai at the end of last year. It was a successful meeting, but global divisions were obvious. Many in the UAE feel that that oil and gas has a part to play in the attainment of the net zero goal.

There are many others however who share Greta Thunberg’s view that oil and gas are the biggest villains in the fight against climate change. They are the bad guys, so to speak.

There are also wide divisions between developed countries, such as the EU, who are eager to promote net zero, and other less developed nations who feel patronised by what they perceive as lecturing and finger wagging by richer countries,

Attacking established industries such as oil and gas will not make them more open to change. A balanced, consensual approach is absolutely necessary to creating a broad coalition to fight climate change.

The UK has shown dynamic leadership in energy policy. We pioneered Contracts for Difference, which have driven investment in renewables, particularly offshore wind. We can be leaders in the development of clean hydrogen, floating offshore wind and SMRs.

We have done it before, and we can show global leadership in the 2020s and the years ahead.

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