Navigating the
Changing Landscape
of the Energy Sector
The energy sector is currently at the forefront of global conversations, with the dual objectives of ensuring energy security and transitioning to greener, cleaner energy sources. We explain the recent changes in the energy sector, the challenges they pose for your businesses, and the actions you can take to navigate this evolving landscape.
What are the changes?
Oil and gas licenses:
Recently, the Prime Minister announced the granting of hundreds of new oil and gas licenses in the UK and in September 2023 the North Sea Transition Authority granted consent for the Rosebank Field, which is the largest untapped oil and gas field in the North Sea. Both of these decisions are based on the belief that domestic gas production has a lower carbon footprint compared to imported liquefied gas. However, this move has faced strong opposition from environmental activists, such as Greenpeace, who see it as contradictory to the UK’s commitments under the Paris Agreement and its Net Zero Commitment.
Carbon capture plant:
A positive development in the energy sector is the announcement of the carbon capture plant at Peterhead and Viking in Humberside. This represents a progressive investment in carbon capture technology, which is essential for reducing carbon emissions and combatting climate change.
Renewables funding:
The Energy Security Secretary has pledged a £22 million uplift for flagship renewables schemes through the Contracts for Difference scheme. This increased funding, coupled with annual auctions, aims to boost confidence in the renewables sector, which is competing with fossil fuels for grid parity and investment.
Operational reforms:
In England, a consultation on operational reforms to the Nationally Significant Infrastructure Projects consenting procedure is now underway. While planning is devolved in Scotland and Wales, this initiative demonstrates progress in removing barriers to large-scale energy generation projects, including wind and solar.
What are the challenges for businesses?
- Environmental concerns: the decision to grant new oil and gas licenses has sparked controversy and legal challenges, as it may conflict with binding international agreements on carbon emissions reductions. Businesses in the energy sector face scrutiny over their environmental practices and must balance profitability with sustainability.
- Regulatory complexity: the energy sector involves complex regulations and permitting processes. The reforms aim to streamline the consenting system, but businesses must adapt to evolving regulatory frameworks and ensure compliance with environmental standards.
- Competition: as renewables vie for grid parity and investment alongside traditional fossil fuels, businesses must compete in a rapidly changing market. Navigating this competitive landscape requires strategic planning and adaptability.
- Community engagement: the emphasis on consulting with local communities and relevant statutory bodies adds a layer of complexity to project development. Building community support and addressing concerns is crucial for project success.
What actions should your business take?
1.
Embrace sustainability: businesses in the energy sector should prioritize sustainability and explore greener alternatives. Invest in research and development of clean energy technologies to align with global efforts to reduce carbon emissions.
2.
Community engagement: establish open and transparent communication channels with local communities. Make sure you address their concerns and involve them in the decision-making process to build trust and gain support for projects.
3.
Stay informed: keep abreast of regulatory changes and industry trends. Engage with industry associations, attend conferences, and collaborate with experts to remain informed and adaptable.
4.
Diversify energy sources: consider diversifying energy sources by incorporating renewable energy into your portfolio. Explore opportunities in wind, solar, and other sustainable technologies.
5.
Carbon capture technology: invest in carbon capture and storage technology to reduce emissions from fossil fuel operations. This technology will become increasingly important as emissions reduction targets become more stringent.
6.
Legal compliance: ensure strict adherence to environmental regulations and international agreements. Conduct thorough assessments of the legal implications of your projects and seek legal counsel when needed.
Expert opinion
In conclusion, the energy sector is undergoing significant changes and facing complex challenges. To thrive in this evolving landscape, businesses must prioritize sustainability, stay informed, engage with communities, diversify energy sources, invest in carbon capture technology, and maintain strict legal compliance. Navigating these changes will not only drive business success but also contribute to a more sustainable and environmentally responsible energy sector.
Claire Petricca-Riding
Partner