Opportunities and threats for rural landowners under the Energy White Paper

Briefing

Amid the pandemic and Brexit, there have been a lot of column inches devoted to the economic recovery and "building back better". In November 2020 the UK government published its 10 point plan for a green economic recovery and at the end of the year published its Energy White Paper (the paper) setting out how the UK will decarbonise its energy system to reach the ambitious target it has set itself to reach net zero by 2050.

The paper presents both opportunities and threats for rural landowners, which we explore below.

Fossil fuel reduction

One the paper's areas of focus concerns efforts to reduce the use of fossil fuels to power homes, vehicles and industries. The paper predicts that this will lead to electricity providing more than half of the energy demand in 2050, which is a 33% increase from the demand for electricity in 2019. The government therefore sets out an ambition for there to be a four-fold increase in clean electricity generation and sees the decarbonisation of electricity being very important in helping deliver the net zero target.

A key part of this will be increasing the amount of electricity generated by off-shore wind and floating off-shore wind farms. The government's target is to see 40GW of offshore wind by 2030, including 1GW of floating offshore wind, which – in alignment with its target for clean electricity generation – is four times current levels.

The power generated will have to reach the mainland and then the grid, and this is a driver behind the government's desire to see an increased role for battery and other new storage systems to provide flexibility into the system. The paper references the investment that the government is making into new storage systems and technologies, and the race to scale-up novel technologies so that they are commercially viable and can attract private investment. These projects could provide many exciting opportunities for landowners.

As well as opportunities to site battery and other storage facilities, the paper also raises the prospect of the increased use of onshore renewables, particularly wind and solar PV. For the first time since 2015 these technologies are to be provided with Contracts for Difference support, meaning that we are likely to see an increased appetite for developers looking to establish such schemes on rural land.

Improving the national grid

Coupled with this is the importance of improving the national grid and facilitating grid connection for projects. The paper talks of substantial investment into the UK's electricity infrastructure to deal with the targeted increased electricity use and increasingly decentralised systems of power generation. This will be welcomed by all those involved in the sector as it is increasingly apparent that grid connection is a driving factor behind whether a renewable power scheme is viable.

Increasing the electrification of the UK power system depends on a well-funded system for delivering that energy where and when it is needed. In addition to the infrastructure investment, there will also be a focus on the distribution network operations taking a more active role in managing the network and shifting power demand and supply in time and location. Again, the government is aiming to get the electricity needed to power the drive to net zero into the right places at the right times.

The move away from fossil fuels and towards electric cars and other vehicles means that there will be considerable investment into electric vehicle charging stations and associated grid infrastructure. While there is likely to be a focus for these in urban areas, there will still be opportunities for landowners on urban fringes or beyond to potentially benefit from this investment.

The paper also indicates that nuclear energy will still play a part in the UK's energy supply, with one new power station and several smaller sites planned – although the locations and further details of these are not yet known. There will also be increasing importance placed on power generation from hydrogen.

Announcing a new biomass strategy

Aside from the more traditional renewable energy sources, the government will also be announcing a biomass strategy aimed at seeing biomass being used sustainably while delivering on air quality targets. This is likely to present different opportunities and possible threats to rural landowners depending on how biomass is treated as a fuel source. Biomass is an increasingly important fuel source in rural areas which may not have gas grid connection, so rural landowners will not want to see its use penalised. Instead, they would almost certainly like to see the market for UK woodchip grow to reduce the UK's reliance on foreign imports.

The paper establishes a grant for new heat pump systems and there will be opportunities for rural estate owners to benefit from this technology. However, it is important that the types of systems available under the scheme are of the size and capacity to adequately serve rural properties and businesses.

Changes to biomass heating and heat pump systems are set against the indication in the paper that the use of fossil fuels in off gas grid buildings will be phased out. This could prove to be an issue in rural areas where the reliance on oil is much higher than in urban areas.

The paper also covers matters to do with heating buildings and a new strategy in this regard is to be published soon. The government would like all private rented homes to reach EPC level 'C' by 2028, and for all non-domestic buildings to level 'B' by 2030 "where practical, cost effective and affordable". This may put an undue strain on rural landowners, given the nature of the housing stock on estates and could see older agricultural buildings being taken out of commission should they not be able to be brought up to suitable energy efficiency standards. This could be extended to include owner occupied houses by 2035 which would be a burden keenly felt in the rural sector where buildings tend to lack the energy efficiency of more modern urban dwellings.

Introducing a new UK emissions trading scheme

Finally, the paper outlines the new UK emissions trading scheme in which certain high emissions industries – primarily power generation and aviation at the moment although more industries are likely to be brought in going forward – will need to stay within certain emissions allowances which will reduce over time. Credits towards this will be able to be purchased, but it does not appear that there will be a market established to allow those companies to offset their emissions against activities in rural areas aimed at sequestering carbon, such as afforestation. Hopefully this will change as this policy is debated further.

While the paper is useful in setting out its overall aims and objectives, stakeholders will want to see the strategy papers and policy frameworks in which these points will sit so that they can direct investment into new projects and technologies. Given that Parliamentary time is at a premium due to post-Brexit issues and the governmental response to the pandemic, it may be some time before these are published. Nevertheless, the paper emphasises the need to act quickly to reduce the UK's carbon emissions and that the UK will have the eyes of the world on it as it hosts the COP26 climate conference later in the year.