Environmental Weekly News Round Up – 29 December 2023
Welcome to our latest weekly Environment Law News Update, where we bring you developments, insights, and analysis in the world of environmental law.
The prime minister plans to scale back UK’s nuclear ambitions
Rishi Sunak is reportedly set to cut the UK’s 2050 nuclear target. Draft versions of a new “nuclear roadmap” suggest that Claire Coutinho, the Energy Secretary will next month commit to building a minimum of 16 gigawatts of capacity by 2050. Under the previous prime minister, Boris Johnson, the Conservative Government pledged that by the middle of the century, the UK would have 24 gigawatts of capacity. This difference is the equivalent of multiple nuclear reactors failing to come online.
The roadmap is expected to not include an interim target for 2035, despite this being a key recommendation of a net zero review published in January. This target is thought to follow on from some warnings that Britain lacks the required workforce and supply chains to deliver reactors at the pace expected to reach 24-gigawatts goals.
Although the Conservative party have a positive record of nuclear power delivery, they have failed to complete a new station since 2010, with the last power station to come online being Sizewell B in 1995. Sizewell C was due to generate power by 2025, however this has been pushed back by at least 5 years.
Hinkley Point C in Somerset is the only plant under construction, that has been delayed and had cost overruns, that have threatened to push back the start of generation to the 2030s also.
However, it has been suggested that the final target remained a subject of internal debate, with Claire Coutinho still supportive of an ambition to reach 24 gigawatts. If a new roadmap is expected, this will likely be announced in January 2024.
Decision to grant permission for Sizewell C is upheld by the Court of Appeal
On July 2022, planning permission was granted for the Sizewell C nuclear plant located in Suffolk, England. As water is indispensable for the operation of nuclear plants, the availability of water is a critical point.
The development proposed constructing a bespoke temporary desalination plant that would provide water during the construction phase of the project. A permanent water supply for the operation stage was not identified.
Instead, the developer relied upon the duty of Northumbrian Water Limited ("NWL") under the Water Industry Act 1991 to identify new water resources to meet the demand forecast for its region via the preparation and publication of a Water Resources Management Plan pursuant to s.37A for Essex and Suffolk over the period 2025 to 2050 (referred to as “WRMP24”).
When granting permission, the former secretary of state Kwasi Kwarteng had considered that Sizewell C and the WRMP24 were separate projects subject to distinct determination processes.
The campaign group Together Against Sizewell C (“TASC”) challenged this decision via judicial review proceedings. Their main ground was that the Secretary of State had failed to assess the environmental impacts of the development as the developer was unable to identify a permanent water supply for the project.
The High Court dismissed the claim as Mr Justice Holgate ruled that the provision by NWL of additional water sources for Suffolk is not part of the Sizewell C project. He considered that the supply of utilities such as water is common to most developments and utility companies should make additional provisions to supply existing and new customers, but that does not mean that the supply is part of each development as the opposite interpretation would lead to “sclerosis in the planning system”.
TASC challenged the High Court’s decision. However, the Court of Appeal has now decided to uphold the minister’s consent for Sizewell C. The Court of Appeal’s judgement (available here) considered that the Secretary of State was indeed entitled in law to regard the nuclear development and the supply of potable water as two separate projects.
Furthermore, the judgement also provided that deferring the appropriate assessment of the impact of the permanent water supply under regulation 63 of the habitats regulations to a later stage was not irrational as the information necessary for a proper assessment was not available at the time of his decision.
Hornsea 3: Another Step Forward towards Energy Security and Sustainability
On 20th December Orsted the Danish multinational officially announced it had reached a final investment decision on the Hornsea 3 windfarm, projecting a late 2027 completion date for the ambitious 2.9GW offshore windfarm. The windfarm will be located in the North Sea off the coast of Yorkshire and aims to extend an existing array of windfarms. It comes with a hefty price tag of £10-11 billion but boasts the impressive capacity to power over three million households in the UK.
Orsted emphasised its readiness for Hornsea 3 by stating that it already has “all major contracts” in place through leveraging insights from its well-established supply chain, largely developed through the earlier Hornsea 1 and 2 projects. Most of the project’s capital expenditure was secured prior to the recent surge in inflationary pressures.
The decision to move forward with Hornsea 3 has been positively received within the UK’s green economy particularly at a time of uncertainty in the offshore wind sector which has been driven by several factors.
The growing global demand for renewable energy has led to increased competition for resources and materials which has had the effect of driving up prices. There are also issues around delays in the production of turbines, foundations and cables leading to longer lead times and higher costs.
Offshore wind farms are becoming larger and more complex requiring larger and specialised components which are often more expensive to produce and transport. The location of offshore windfarms also presents unique challenges such as harsh weather conditions, deep water depths and seabed conditions. Finally (but not exhaustive) access to affordable funding and financing can influence project costs. A combination of these factors has led several developers in the UK, EU, and the US to halt or abandon offshore wind projects.
The Contracts for Difference (CfD) auction round in September played a pivotal role in Orsted’s decision. While numerous clean energy projects secured funding, offshore windfarms projects faced rejection significantly reducing the confirmed project capacity. In response policy makers elected to increase CfD maximum price strike for offshore wind with a 66% uplift for traditional turbines and 52% increase for floating projects, providing a boost to both traditional and floating projects. The CfDs are used in the UK as a key policy mechanism to support and incentivise investment in low-carbon and renewable energy projects.
Orsted’s chief executive and group president Mads Nipper praised the competitive global market for offshore wind and welcomed the favourable policy regime in the UK which played a role in securing the investment. The company’s lead for the UK and Ireland further emphasised Orsted’s commitment to the UK market for offshore wind and its continuous investment in clean energy infrastructure and supply chains.
The decision by Orsted not only advances its own investment in the UK’s clean energy infrastructure but also reinforces confidence in the offshore wind sector’s capacity to deliver. It also aligns with the broader global trend toward renewable energy. Offshore windfarms have a critical role to play in the pursuit of not only energy security by reducing the risks associated with volatile energy markets and supply disruption but also by addressing the urgent challenges posed by climate change and reducing our greenhouse gas emissions.
The end of fossil fuel in ESG funds?
A recent French ruling suggests that Pan-European ESG funds may need to sell “all” of their holdings in fossil fuel if they claim their investments are on Environmental, Social and Governance –ESG– basis.
France has been outspoken in their belief that EU rules on ESG funds need tightening in order to cut greenwashing for some time. France’s markets watchdog, AMF, commented earlier this year with concerns over EU ESG regulation. AMF said there should be a “targeted review” by Brussels in relation to the EU’s Sustainable Finance Disclosure Regulations (SFDR). The SFDR’s assist asset managers classify funds as sustainable, however it has historically contained no minimum requirements, or even a definition of what a sustainable investment is.
France launched their French Socially Responsible Investment (SRI) label in 2016, aimed at allowing the general public to invest in savings funds and vehicles that integrate ESG principles.
Any funds operating under the SRI label, will from the start of 2025, be barred from investing in any companies that launch new hydrocarbon exploration, exploitation or refining projects. Companies that exploit coal, or other “unconventional” hydrocarbons will also be off limits. Naturally fossil fuels are already generally off limits to ESG funds investments.
Although formally only affecting funds that operate in France, these restrictions will reverberate throughout Europe as many asset managers market the same ESG funds across Europe in order to minimise duplication and costs and maximise liquidity. Similarly, this will also affect traded funds which are generally listed on a number of exchanges and moved between other European countries.
This may mean that France has inadvertently created the ‘golden ESG fund’ and mean that ESG funds that align with the French label are more preferable for investment and potentially more valuable for corporate ESG credentials.
The downside, however, means that there could be a proliferation of differing ESG standards across the continent, creating a barrier meaning ESG funds can only exist within their domiciled countries. There is the possibility to have as many as 15 national and European labels by 2025. At what stage does the EU step in? Will the UK then follow suit, or will there be, once again, a divide between the UK and the European ESG fund regulations?
