Economic Report 2020

investor focus on environmental, social and corporate governance (ESG) and how their investments align with net zero objectives alongside financial returns. This is an increasingly important consideration in attracting the level of investment required across the energy system in the future. Between 2010–19, around £100 billion of capital (42 per cent of UK energy investment) was associated with the development of new oil and gas reserves on the UKCS. Although oil and gas demand is projected to fall in future, it will remain a core part of the energy mix. It is therefore crucial that investment continues to ensure that the required UK supply is in place to meet demand. A slowdown in oil and gas investment will not reduce the rate of consumption, but will mean that supply will fall at a quicker rate than demand. A domestic industry provides greater opportunity to control associated emissions, while supporting energy security and the economy through the transition. Investment in electricity systems has increased in recent years and averaged around £10 billion per year since 2010. The electricity sector has attracted the largest investment levels in the UK energy sector since 2016. The Climate Change Committee estimates that total investment in the power sector will need to double (to £20 billion per year), in line with forecasts

that electricity consumption will need to almost double by 2050 for a net-zero outcome. 15 The increase in electricity investment seen in recent years has driven the significant growth in renewable power capacity across the UK, which has seen total wind power capacity increase from 5.4GW in 2010 to 24GW last year, 16 9.8GW of which is offshore. This is an area which will continue to increase in the years to come, following the UK government target to grow wind capacity to 40GW by 2030 17 and with the support put in place through the Offshore Wind Sector Deal. 18 Aurora Energy estimates that reaching the ambition of 40GW of wind power by 2030, (predominantly from floating wind) will require up to £50 billion of cumulative investment, over the next decade. 19 Many of the largest investments in the UK renewable power sector are being made by traditional oil and gas producers who are becoming increasingly integrated across the energy sector. Equinor and SSE are developing the world’s largest offshore wind farm, Dogger Bank, off the east coast of England – a project worth some £9 billion between 2020–26, the first two phases of which now have funding in place. 20 TOTAL is also investing in the Seagreen1 wind farm off the east coast of Scotland – requiring investment of around £3 billion in the coming years. 21

15 https://www.theccc.org.uk/publication/net-zero-the-uks-contribution-to-stopping-global-warming/ 16 https://assets.publishing.service.gov.uk/government/uploads/system/uploads/attachment_data/file/875384/Wind_powered_electricity_in_the_UK.pdf 17 https://www.gov.uk/government/news/new-plans-to-make-uk-world-leader-in-green-energy 18 https://assets.publishing.service.gov.uk/government/uploads/system/uploads/attachment_data/file/790950/BEIS_Offshore_Wind_Single_Pages_web_optimised.pdf

19 https://www.auroraer.com/insight/reaching-40gw-offshore-wind/ 20 https://www.equinor.com/en/news/2019-09-19-doggerbank.html 21 https://www.total.com/media/news/communiques/total-enters-giant-offshore-wind-farm-project-scottish-north-sea

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