Speeding up clean energy shouldn’t come at the expense of a bigger state

The Planning and Infrastructure Bill, which had its second reading earlier this week, has major implications for the clean energy transition. There are several positive supply side reforms which conservatives ought to welcome. But there are also grounds for concern about the centrally planned approach to energy being advanced by the bill. 

Sam Hall | Director

It would be a mistake for conservatives to attack the bill in its entirety. The government has wisely chosen to enact several supply side reforms, which were initiated but not completed under the Conservatives, to streamline and increase certainty in the planning process for clean energy infrastructure. 

There are three of note. Reducing the stages in the planning process where major projects can be judicially reviewed, as recommended by Lord Banner, will reduce costly delays due to vexatious legal cases. Additionally, requiring the regular updating of national planning policy statements will also tackle a common basis for legal challenges. And shortening the timelines for approving nationally significant infrastructure projects will reduce the time that projects are stuck in limbo, having to pay staff but unable to generate any revenue. 

Fixing delays and increasing certainty will have a beneficial impact on the cost of building new infrastructure and make the UK a more hospitable place for private investment. 

However, it is vital that the acceleration applies to the time taken for government to make a decision, rather than for communities to have their say. Meaningful local engagement is important if the government is to avoid backlashes to infrastructure development. 

Rather than trying to bypass local views, the government should be focused on winning over more people to clean energy infrastructure and incentivising them to accept new developments. That’s why it’s good news the bill aims to mitigate the risk of local opposition with a mandatory community benefit scheme. Ministers are promising energy bill discounts for residents living within 500 metres of new pylons and substations. 

Although the principle of financial compensation is welcome, communities must still be given a meaningful say, and be consulted, on developments in their area. Furthermore many communities will be disappointed at the level of compensation being proposed, which is less generous than the original proposal of £1,000 per year, and which will exclude those living more than 500 metres away but still able to see new infrastructure from their windows. It would certainly be sensible to extend the requirement to pay bill discounts to communities which host new energy generation, as a way to address concerns about new solar and onshore wind farms.

More concerningly, however, there are powers in the bill for the government to decide which new energy projects get priority access to the electricity grid. Grid capacity is scarce. Tackling lengthy delays for grid connections - which can be up to 10 years - is vital for lowering costs of building new energy infrastructure, making it cheaper to balance the grid, and enabling the growth of new industries like AI. 

The plans to remove from the queue ‘zombie’ projects that aren’t very well progressed are sensible. But the proposals to give priority grid connections to projects that are included in the department's 2030 clean power plan are worryingly statist. It means critical longer-term projects, such as long duration energy storage (LDES) and nuclear, which would be delivered after 2030, and other projects not in the central plan, will be pushed down the queue. This sits alongside other concerning statist elements in the government’s energy plans, such as the creation of GB Energy and the central targets for different technologies which are functioning like capacity caps. 

The last government deserves a lot of credit for grasping the grid capacity issue and kick-starting a comprehensive suite of reforms to accelerate connections to the grid. But they too accepted a greater role for central planning, with the creation of a ‘strategic spatial energy plan’ in 2023.

More market-based alternatives to relieving grid congestion should be explored. Energy expert Adam Bell has proposed allowing companies to build their own grid infrastructure, thereby encouraging competition. This would enable, for example, consortia of data centres to club together and pay for the grid reinforcements they need whilst creating additional capacity on the grid. 

Stronger locational price signals in the electricity system could also help reduce the need for more grid infrastructure by encouraging better decisions on where to site new sources of demand and generation.   

Finally, the bill creates a new support mechanism for LDES projects, which can store surplus power for longer than eight hours (unlike batteries). This would provide a guaranteed minimum price for their power and a cap on revenues to prevent excessive profit-making. This will unlock more investment in pumped hydro, which can play an important role in managing wind lulls and displacing gas as the marginal source of electricity on the grid, thereby lowering bills. 

However, the mechanism isn’t well suited for supporting other LDES technologies, such as compressed air or hydrogen. This means once again the government is picking winners, which both risks wasting billpayers’ money (civil servants are worse than markets at deciding the cheapest combination of technologies to balance the grid) and limiting innovation. Instead, the government should have taken forward proposed changes to the Capacity Market to create a technology-neutral incentive for more firm, low-carbon dispatchable generation.  

Energy isn’t the only place where the central planning instincts of the government are on display. My colleague Kitty has written in a separate blog about the increased role for central plans and quangos in its proposals for strategic environmental mitigation for protected sites. It would have been far better to create markets for environmental mitigation measures and enable farmers and land managers to deliver them, building on the biodiversity net gain model.

The bill will certainly increase certainty and speed in the planning system for clean energy infrastructure developers. But it risks doing so at the expense of efficiency, competition, and ultimately bills. If we want more cheap, clean energy, let’s hope the statism can be watered down as the bill progresses through parliament. 

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