Exclusive: Kent on the UK’s energy transition plans
The government finally unveiled its much-awaited energy security strategy earlier this month, with ambitious targets for boosting offshore wind, solar, nuclear and hydrogen.
This follows Russia’s invasion of Ukraine, with the government keen to ensure the UK’s energy independence and the security of its energy supplies.
To achieve this, Downing Street is pushing to ramp up domestic energy production and cut its reliance on overseas energy sources.
City PM spoke with Kent’s chief energy transition officer, John Kent, about the energy investment climate in the UK, and the viability of its plans.
The energy services business aims to accelerate the shift towards green energy and to make conventional sources cleaner, working across six continents with annual revenues of more than $1bn.
Q: Where do you see the UK’s best opportunities to ramp up production and ensure secure energy supplies?
It is probably best to consider supply ramping up through two-time horizons, short-run and secondly in the longer run.
The most realistic production increase relies on North Sea gas in the short run.
Maximising this asset provides greater energy security while utilising existing infrastructure. The longer-term horizon will have a much greater reliance on wind and nuclear; these energy sources, while already in the development phase, still have a prolonged development cycle before they come online.
Q: What role can North Sea fossil fuels in the energy transition?
North Sea oil and gas can play a significant role in our energy transition journey.
Firstly, it helps provide energy security while we await more sustainable energy sources to come online.
Secondly, it is an excellent source of gas, which is a lower carbon transition fuel.
Finally, the North Sea also offers the opportunity to act as a large-scale store for carbon captured from onshore industrial emissions. Sequestering carbon permanently will form an essential part of our journey to net-zero, and repurposing legacy North Sea Infrastructure can play a vital role in that.
Q: Do you think there is a role for hydrogen, and what is your view on the government’s 10GW target?
Yes, in the long term, hydrogen will have an important role to play in our multi-decade energy transition. Hydrogen can play a crucial part in adding accurate scale to balance energy demands with the intermittent nature of renewables.
Secondly, hydrogen and its various forms, such as ammonia, offer the opportunity for fuel replacement in hard to abate sectors such as long-haul shipping and high heat intensity industries. I see less of a role for hydrogen in light vehicle transportation as EVs will dominate that segment.
However, HM’s government has set ambitious targets, and importantly it is also putting its money behind its objectives by backing several hydrogen projects across the UK, such as Hynet.
Q: What missed opportunities do you see from the energy strategy? Should more have been done to reform planning laws and boost onshore wind?
The benefit of looking at missed opportunities lies in recalibrating our future actions through lessons learned. The greatest opportunity moving forward is speed in getting new energy infrastructure in place. Streamlining all aspects of planning can help there for all renewable sources and get these online at scale as soon as possible.
Q: How important is insulation and energy efficiency to a greener future?
As daily energy consumers, all of us have an important part to play in the energy transition. We can play our role by ensuring that we use energy as efficiently as possible. Simple measures such as having our houses properly insulated will have an impact. Being more conscious of how we travel and purchase our daily goods all have the potential to have a positive impact on our sustainable energy future.
Q: Where are the key opportunities for energy investors?
Service companies working across the full energy spectrum will likely see strong returns from their portfolio approach. Proven renewable energy generation technologies looking to scale, such as wind and solar, are likely to offer solid long-term returns.
However, many of these developers are already experiencing high valuations. Lower carbon gas developments may offer more compelling returns as governments look to ensure energy security during the transition.
Finally, the more speculative hydrogen potentially offers higher risk and higher return opportunity: the parties who can find the sweet spot of driving down the production cost while also finding scale in good demand locations may offer positive return