The Energy White Paper: Powering our net zero future
Each week we will look at aspects of the White Paper, including the key policy commitments and the impact they will have.
The Energy White Paper was published on 14 December 2020. The White Paper sets out the government’s long term vision for tackling climate change and achieving carbon net zero by 2050. Each week we will be looking at different aspects of the White Paper, focusing on the key policy commitments which it makes and the impact that it will have on the country.
Tracy Lake looks at “transport” and how the government’s “six strategic priorities for the transport decarbonisation plan” (“The Transport Decarbonisation Plan”), to be published in Spring 2021, will deliver a net zero transport system.
Transport accounts for 28% of UK domestic greenhouse gas emissions and over 90% of these emissions come from our roads, with emissions from passenger cars and light goods vehicles contributing over two thirds of all transport emissions. In recent years, the government has begun to take forward a series of measures to tackle decarbonisation of transport, confirming that the sale of new petrol and diesel cars will cease by 2030 (ten years earlier than originally planned) and that, between 2030 and 2035, any new cars and vans sold that emit “from the tailpipe” must be capable of “significant zero emission” (a term which will be defined by the government in consultation this year but which will, no doubt, include plug in and full hybrid vehicles).
Despite the government’s focus on an electric vehicle (“EV”) future and an acceleration in the uptake of EVs, EVs still represent only a small proportion of vehicles on the roads and there is much more work to be done to achieve The Transport Decarbonisation Plan. The White Paper details the government’s plans to support industry and consumers to make the switch to cleaner vehicles through a series of measures aimed at:
- improving consumer confidence in EVs;
- dealing with the challenges faced by industry in transport and logistics;
- providing measures to encourage innovation in the industry including new technology;
- and the creation of jobs
all of which are underpinned by a series of regulatory measures that the government will introduce, working together with Ofgem, to ensure that regulation provides affordability and security for consumers and businesses.
Decarbonisation of transport, including a mass uptake of EVs, will need to have consumers at its heart and, as with any massive societal change, organisations will need to be customer-focused and in tune with the needs of consumers. EVs will have a significant impact on how households use energy and, without sufficient consumer confidence, the journey to decarbonise transport will stall. The establishment of the Electric Vehicles Energy Taskforce by the government is aimed at ensuring that consumers’ interests are at the heart of the decarbonisation of transport journey and, in the White Paper, the government has reaffirmed its commitment to making the right reforms to ensure that carbon emissions are reduced while also protecting the interests of consumers.
To encourage the uptake of EVs, the government currently makes a number of grants and tax benefits available to consumers, many of which are aimed at making EV ownership more affordable and aimed at offsetting the costs of installing charging points in consumers’ homes. However, despite great attempts by some companies to stimulate the take-up of EVs (including that of energy company Engie which has a network of rapid charging points in West Yorkshire which are free to use), charging concerns and affordability remain key barriers for EV uptake by consumers. Consumers are concerned with the accessibility and convenience of EV charging and refuelling stations, particularly in rural areas. This, together with limited vehicle range in some EV models and concerns about technological reliability and safety (for example, a perception that electric batteries pose a higher fire risk that fire authorities are not yet prepared for) has resulted in many consumers not feeling sufficiently confident to purchase an EV, with many preferring to wait until the technology is at a more advanced and proven stage.
The successful mass rollout of EVs then depends largely upon there being easy access to reliable and cost-effective public charging infrastructure. At present, owners of EVs often face challenges finding the right chargers, in the right places, when they are needed. Much of the existing charging infrastructure is ageing and does not support the fast charging needs of modern EVs and it also lacks compatibility and integration between different networks.
In order to combat this, the White Paper sets out the government’s intention to provide a £1.3 billion funding package to create an extensive network of charge points in homes, workplaces, streets and on motorways across England, as well as grants of £582 million for the purchase of zero or ultra-low emission vehicles. A further half a billion will be spent, over the course of the next four years, on the development and mass-scale production of batteries for EVs and other technologies, all of which will help to support the automotive sector, including its supply chain. Projects similar to the collaboration between Warwick University, Jaguar Land Rover and others, which culminated in the National Automotive Innovation Centre, the largest automotive research and development centre in Europe, will no doubt benefit.
Decarbonisation of transport will also involve the evolution of the energy system’s governance frameworks and arrangements, including the roles of the regulator, Ofgem, and those of the gas and electricity system operators and the transmission and distribution network operators. It will be important for those industry players to collaborate as much as possible and we wait to see the government’s vision for energy as a guide to Ofgem when it consults this year on The Strategy and Policy Statement, which will set out its strategic priorities and, subject to parliamentary approval, will require Ofgem to undertake its functions in a manner which delivers a net zero energy system at the same time as ensuring reliable energy supplies at the lowest cost for consumers. In turn, affordability of electricity used to power EVs and households’ management of their bills should follow.
The use of smart meters as a means of consumers monitoring their energy consumption and assessing the best time for EV charging should be advantageous, providing consumers with more control, choice and flexibility over their energy use. Time of use tariffs will be introduced, aiming to reward consumers for using less electricity at peak times or using more when demand is low in an effort to reduce the cost of using clean electricity, making the system more efficient and saving consumers money.
The government has powers, pursuant to the Automated and Electric Vehicles Act 2018, to mandate the use of smart technology in vehicle charge points, enabling consumers to charge their car automatically when electricity is cheaper or greener, rather than at peak times. Further regulations will be introduced in 2021 to mandate that private EV charging points must be smart. The government wants consumers to have confidence that they will be offered choice, convenience and appropriate protections and can make decisions based upon accurate information.
One thing that is not dealt with in the White Paper is the cost of maintaining EVs. Although the perception is that purchase prices of EVs may be higher than the prices of cars with traditional internal combustion engines, the costs of servicing and maintenance are likely to be significantly lower in the long term given the greater efficiency and fewer components of an EV engine. This is one area that the government needs to target in an effort to inform consumers and persuade them to make the switch to EVs. One concern, to consumers and car dealers, is the cost of replacement of a battery given its possible lifespan — the residual battery life will factor in the price of the vehicle. A further consideration for the automotive sector relates to the weight of electric batteries for vehicles and the impact that the weight has on storage and transportation. For example, batteries could amount to 25-30% of the weight of a vehicle and will occupy far more space on HGVs transporting car parts than currently; the logistics of transporting and storing EV batteries will require innovative solutions. Further, in the case of maintenance or replacement of EV batteries at franchised dealerships, where consumers will go to seek advice, will there be sufficient space in workshops for the safe storage and handling of EV batteries? Will the use of fire-proof containers be feasible? How, practically, will those EV batteries be off-loaded from HGVs into their storage position within the franchised dealership? There is much to consider, and a lot of complexity, in respect of practicalities alone.
Industrial Use — Transport and Logistics
The White Paper details that, after passenger cars, Heavy Goods Vehicles (HGVs) are the biggest contributor to domestic transport emissions in the UK and zero-emissions solutions for HGVs are much less developed by comparison. Smaller battery-powered HGVs are equipped to deal with short distance and medium weight applications such as urban distribution. However, the solution for larger, long-haul road freight vehicles is not yet clear. To combat this, the White Paper provides that the government will invest £20 million in the next year to pioneer zero-emission truck technologies to support industry to develop cost-effective zero-emission HGVs in the UK. In his “Ten Point Plan for a Green Industrial Revolution”, Boris Johnson announced that government will soon consult on a date for phasing out the sale of new diesel-powered HGVs in the UK.
As well as Battery Electric Vehicles which will aim to deliver the vast majority of decarbonised transport, the government will invest in trials to test the viability of other, larger, long-haul vehicles powered by hydrogen and other zero-emission technologies. It will also invest in the delivery of battery-electric and hydrogen buses, together with emerging technologies in relation to rail transportation, including battery traction and hydrogen rolling stock which could complement the proven use of electrification in rail services.
Aviation and maritime are not overlooked in the White Paper, with the establishment by the government of the Jet Zero Council (to adopt a strategy to reach net zero aviation) and the continued implementation of the Clean Maritime Plan (to support the vision of UK zero-emissions shipping) respectively. Both aviation and maritime will, together with the modes of transport already referred to in this article, feature in the Transport Decarbonisation Plan.
Innovation and Tech
Innovation and technology, as with any positive, societal transition, are key. The White Paper states that competition should be a spur to greater investment in technologies that are cheaper and more efficient; or to the innovation which will reduce the costs of existing options. The government will ensure a market framework that promotes effective competition and delivers an affordable, secure and reliable system, consistent with the net zero emissions target by 2050. This market framework should enable the deployment of the most efficient, low-cost technologies and mitigate any associated delivery risk.
The government will ensure that electricity networks are able to integrate increasing renewable generation and more EVs while controlling system costs. The electricity network is now becoming more decentralised meaning that there will be numerous and smaller sites of generation across the country. The aim of this is to ensure that charging EVs at workplaces or service stations has less impact on the overall electricity network.
In addition, the White Paper sets out the government’s aim to use data to discover cheaper ways of delivering energy by making information available to those who can provide solutions to reduce costs and improve services. The government is implementing the Energy Data Taskforce’s recommendations through Modernising Energy Data, a joint programme with Ofgem and Innovate UK and the government will publish an energy data and digitalisation strategy jointly with Ofgem in spring 2021, setting out progress against the specific recommendations and showing how better use of data is realising the government’s objective of a digital, clean energy system.
The White Paper states that across the UK, almost half a million people are already employed in the low-carbon economy and its supply chains and by 2050, the domestic market for smart systems and flexible solutions, including EV smart chargers and smart network equipment, could contribute almost £1.3 billion to the UK economy, with exports of these products adding a further £2.7 billion. The UK market for smart systems equipment and related services could support 10,000 jobs by 2050, with a further 14,000 jobs supported by export markets.
The automotive sector itself will, of course, harness technology, using data-driven systems and the latest software capabilities, as a means of progressing, and competing in, the EV market. Just this week (15th February), the CEO of Jaguar Land Rover (“JLR”), Thierry Bolloré has announced that JLR is “re-imagining” its strategy and will be an “all-electric luxury brand from 2025”, with Land Rover welcoming six pure electric models within the next five years and aiming for net zero carbon emissions across its businesses, supply chains, products and operations by 2039. It will phase out diesel vehicles by 2026 and is also working on hydrogen and fuel cell technology prototypes, which could hit the UK roads this year. As a leading vehicle manufacturer and with the backing of its parent company, Tata, and with access to leading players in energy, research and development, technological innovation and software development, JLR will no doubt succeed in its aim to transition to a “battery first business” with products that are “clean luxury”, at the same time as securing jobs across the UK. Across the automotive sector, sustainability will become the new benchmark in quality.
As the Energy White Paper shows, we are on (some would say) a long and winding road to the decarbonisation of the UK’s entire transport system and these are exciting times for many sectors, including energy and waste (recycling of batteries in the “circular economy”), environment, construction, transport and logistics and information technology. Whilst the electric vehicle revolution is already underway, other technologies for use in transport are advancing quickly and will be supported by the government’s focus on its six strategic priorities.
Although the government is working to encourage investment in improving the UK’s EV charging network, rolling out thousands of fast charging points is not straightforward as each new charging site will require a number of commercial agreements, relating to property and rights of access, IT, construction and power.
In addition, the infrastructure (both physical and digital) required to manage the EV charging network will need significant investment in capacity and technology. This infrastructure should also be future-proofed to ensure that the power and network demands of a much greater proportion of EVs on the roads can be met.
The government has, in legislating in relation to EVs on a number of occasions (including the Modern Transport Bill (2016), the Vehicle Technology and Aviation Bill (February 2017) and the Automated and Electric Vehicles Act (2018)), laid a roadmap to transition to a decarbonised transport future. However, we await The Transportation Decarbonisation Plan, with its focus on six strategic priorities, for more detail.
Jim Jordan looks at “industrial energy” and how the government proposes to reduce emissions from industry by around 90 per cent from today’s levels by 2050.
The White Paper confirms that about half of emissions from manufacturing and refining are concentrated in the UK’s major industrial clusters being Merseyside, Grangemouth, Teesside, Humberside, South Wales and Southampton.
Energy efficiencies alone will not get us to net zero. The White Paper refers to a number of obstacles to the successful decarbonisation of industry such as the capital cost of necessary investments, the need for additional infrastructure and long lead times for certain technologies.
The government proposes stimulating action and investing in the critical infrastructure which enables the deployment of low-carbon technologies.
The White Paper offers certain key commitments from the government including a new strategic approach to clean industrial energy consisting of carbon capture utilisation & storage, clean hydrogen and a UK emissions trading scheme, together with capital support for businesses to help industry become more energy efficient.
The government will publish an Industrial Decarbonisation Strategy in spring 2021 to set out details of how it will support the decarbonisation of the manufacturing industry. The intention is to encourage new industrial sectors to flourish, catalyse innovation for new technologies and boost UK manufacturing and support thriving construction and operations sectors.
As part of the plan, the government will increase the Industrial Clusters Mission to support the delivery of four low-carbon clusters by 2030 and at least one fully net zero cluster by 2040. The focus on decarbonisation in clusters will enable economies of scale.
The government will invest £1 billion up to 2025 through the Carbon Capture and Storage Infrastructure Fund to facilitate the deployment of carbon capture utilisation storage (CCUS) in two industrial clusters by the mid-2020s and a further two clusters by 2030. This key commitment will also support the wider deployment of CCUS creating new markets for UK businesses home and abroad.
The White Paper makes it clear that the production and use of clean hydrogen will be important in achieving net zero emissions by 2050. The content of the dedicated Hydrogen Strategy scheduled for publication in early 2021 will be crucial in determining the success of the approach to hydrogen with the ultimate objective being to make the UK a world leader in the production and use of clean hydrogen. Furthermore, the government will create a Net Zero Hydrogen Fund to support low-carbon hydrogen production, providing £240 million of capital co-investment out to 2024/25.
The White Paper commits to implementing the world’s first net zero carbon cap and trade market, the UK Emissions Trading Scheme. This will be a market-based measure that will provide continuity for businesses with a cap being set on the greenhouse gases that businesses can emit, which will decrease over time. Businesses then buy and sell emissions allowances through government auctions or secondary markets.
Key to recognising the need for private sector investment is the awaited details in 2021 of a revenue mechanism to bring through private sector investment into industrial carbon capture and hydrogen projects via new business models to support these projects. The White Paper recognises that over the long term, cost reductions in low-carbon technologies, coupled with a robust carbon price signal and a thriving market for low-carbon products, will drive investment.
The government is making significant commitments to the industrial energy sector. We have been running monthly hydrogen forums with key financing entities to discuss barriers to hydrogen projects and how to overcome them. What we have found is that lenders are very much engaged with the opportunities that hydrogen presents. However, from our discussions with financing parties, the concern is that there is no real market for CCUS, or even hydrogen at the moment. There are also concerns around the lead-time for rolling out green hydrogen solutions, where blue hydrogen is more realistic in the short to medium term. The government acknowledges many of these problems and the White Paper refers to the design and implementation of a business model to provide revenue support and improve companies’ confidence in investing. That business model will be crucial in the context of private sector investment in the industrial energy strategy.
The success of the industrial energy strategy will depend very much on the detail of the proposed new commercial framework (due by 2022), sustained investment by the government in industrial clusters and technology and the upskilling of labour. As it stands, a lack of legislative clarity and a perceived element of technology risk seems to be stifling the private sector market with respect to industrial decarbonisation. The true success of the commitments will depend wholly on the quality of the various follow-up papers and the approach to adjusting the legislative framework which, for key technologies such as hydrogen and CCUS, does not exist at the moment.
However, these are exciting times for hydrogen and the road to net zero. The recent news that Essar, the Indian energy company, and Progressive Energy, are investing £750 million as part of the HyNet scheme demonstrates that projects are not just a pipeline dream, they are happening.
Simon Colvin looks at the role that improved energy systems will play in achieving net zero by 2050.
Chapter 3 of the White Paper sets out how the government intends “to enable a smarter, more flexible energy system, which harnesses the power of competition and innovation to the full”. This is not about how the government itself can provide such a system; it is about its facilitation of the move to and delivery by others of such a system.
The key elements of the delivery plan include:
- Minimising costs to consumers;
- Ensuring energy networks can properly integrate increasing decentralised energy generation;
- Ensuring the proper use of data about supply and demand to deliver efficiencies and minimise costs; and
- Implementing a regulatory structure that facilitates the move away from carbon-intensive fuel sources, greater competition and increased investment.
There are five areas of key focus in the White Paper:
1. Efficient electricity markets
The focus here is on:
- trying to drive down the costs of energy transportation; and
- to improve the balancing of supply and demand
To achieve this the government wants to open the energy system to private sector investment and further innovation.
To facilitate the delivery of greater flexibility in the system the government intends to publish a new Smart Systems Plan in spring 2021.
The White Paper restates the very important role that energy storage plays in ensuring flexibility and in ironing out the lack of consistent supply from decentralised renewables. Storage also has a significant role to play in moving away from gas. The government wants to create conditions to facilitate the greater roll-out of storage which includes defining energy storage in law. This is in order to find a permanent solution to the temporary stopgap measure introduced by Ofgem in October 2020 concerning the classification of energy storage as its own asset class.
The government intends to use the Net Zero Innovation Portfolio to launch a major competition to accelerate the commercialisation of longer duration energy storage for delivery in 2021. £100 million will be available from the £1 billion Net Zero Innovation Portfolio.
The White Paper details the creation of new markets to facilitate trading between flexible energy storage sources at times of high demand via automated dashboards and auctions. The expectation is that this will be done at both a regional and national level.
The government is advocating an increased focus on balancing services and markets to ensure greater market access and more real-time trading. The use of data and tech will have a significant role play. That said, the capacity market is here to stay at least until its next review in 2024.
2. Network infrastructure — greater competition
The government is intent on introducing competition in the delivery of network assets to reduce costs. They intend to do this by introducing a competitive regime through which others rather than just network operators will be able to build, own and operate assets that will form part of the network. Tendering will relate to both the transmission and distribution networks. The government will bring forward legislation to provide for such tendering and will nominate a body to lead the tendering process.
It is very well understood that the growing EV market will mean greater demand alongside the need for roadside charging infrastructure associated with the strategic road network. Again, the government is keen to facilitate this.
There will also be a more strategic focus on the onshore network connections for offshore wind farms so that the onshore connections can be shared — thereby minimising any impact and reducing costs. There will also be a focus on the extent to which interconnector infrastructure can be shared with offshore wind, again, reducing costs and providing other direct flexibility options.
3. Digital infrastructure
There is widespread acceptance that the energy system of the future needs to incorporate modern digital infrastructure. This is reflected in the White Paper.
One aspect of digital infrastructure relates to data. The government intends to publish an Energy Data Strategy in 2021 which will build on the work of the Energy Data Taskforce and their report published in 2019.
Other aspects include the use of AI and machine learning to ensure optimisation, manage balancing services and facilitate the operation of some real-time markets and trading.
The White Paper references the further use of Modernising Energy Data competitions and related funding to drive innovation.
The White Paper recognises our current dependence on gas alongside the fact it will take time to transition away from gas to other energy sources.
While gas is part of the mix, there is a need to ensure the ongoing security of supply and the use of the least carbon-intensive sources of gas.
As we transition to other sources of energy, such as hydrogen, and we begin to capture carbon dioxide, the infrastructure currently used to transport gas can be used for other purposes and still has a critical role to play. The government is planning further consultations and workshops in 2021 to explore what the transition away from gas means for ‘clean energy systems’.
5. Energy system institutions and governance
The White Paper reflects on the fact that our current approach to energy system governance was developed 30 years ago and needs to evolve to be fit for purpose. As set out above, the proposals for the transformation of our energy system will see wide-ranging changes and we need a governance structure that is able to provide effective oversight and regulation to deliver on the government’s goals. We have already seen some early signs and announcements of what this might mean — see analysis below.
Very simply, there is a lot to do if the government is to deliver on its key commitments. The sector is going to have to embrace a period of rapid change and development. There will need to be greater collaboration to make the shift possible. The need for significant investment is a real driver behind opening up existing markets and creating new markets alongside the introduction of more competition to bring in more private finance.
It is interesting to note we have already seen reports in the news of calls to implement some of the recommendations in the White Paper.
Last week (22 January) Ofgem called for the role of electricity systems operator to be taken away from National Grid because of concerns about possible conflicts of interest. That is despite the fact National Grid’s ESO role is legally separated from its energy networks business. There have been calls by some for the Independent System Operator proposed by Ofgem to form part of a National Energy Agency tasked with overseeing the wider transition to net zero emissions.
Energy systems are just one piece of the very large net zero puzzle that the government is grappling with at the moment. The White Paper is a very good starting point and if many of the ideas and proposals can be brought forward, our energy system of the future should be able to underpin our transition to net zero by 2050 if not before.
Buildings and delivering net zero
Jim Jordan looks at Buildings and how delivering the net zero target means largely eliminating emissions from domestic and commercial buildings by 2050.
Buildings are the second-largest source of emissions after transport with 90% of homes in England using fossil fuels for heating, cooking and hot water.
The government wants to transform how buildings use energy while minimising disruption to consumers. The White Paper clarifies that the installation of energy efficiency measures and tighter building regulations have improved the energy performance of buildings, lowering consumption and have helped to reduce household dual fuel bills. However, in order to achieve net zero by 2050 much more needs to be done. The White Paper challenges the impact of Energy Performance Certificates (required to provide a prospective owner or tenant with information on the energy performance of a building and recommendations for improvement) and identifies the scope for reducing emissions from larger commercial and industrial buildings.
The government will publish a dedicated Heat and Buildings Strategy in early 2021 to set out more detailed plans and policy levers to encourage consumers and businesses to make the transition.
The White Paper commits to improving building energy performance. This covers new buildings, existing homes, commercial & industrial properties and public sector buildings and follows on from the November 2020 announcement of £1 billion of funding to continue to support the decarbonisation of buildings through improved energy efficiency. These funds are being allocated through existing schemes such as the Green Homes Grant Voucher Scheme, the Public Sector Decarbonisation Scheme and the Social Housing Decarbonisation Fund.
The Future Homes Standard (upon which the government responded to the ongoing consultation on 19 January) will require new-build homes to be zero carbon ready and have 75% to 80% lower carbon emissions than those built to current standards. An additional requirement is for new homes to have a reduced carbon footprint of 31% by 2021 compared to current levels.
The White Paper also anticipates a consultation on increased standards for non-domestic buildings. The Prime Minister’s Ten Point Plan extended funding schemes to promote carbon reduction of existing homes ahead of regulatory measures scheduled for introduction in the 2020s. Such schemes can be applied to a range of measures from cavity wall and loft insulation and air-source heat pumps, to draught-proofing and double or triple glazing. These measures are targeting an improvement to the Energy Performance Certificate rating of existing homes.
The White Paper states that offices, retail space, hospitality and industrial buildings account for around 80% of private sector buildings energy demand. There will be a consultation on tightening the minimum Energy Performance Certificate standards to band B by 2030 where cost-effective. Furthermore, the government recognises that the lack of information and the upfront capital costs of installation can deter investment in measures such as energy management systems. It is proposing a new energy efficiency scheme focused on small businesses.
The White Paper confirms the announcement in the Prime Minister’s Ten Point Plan that it will extend the Public Sector Decarbonisation Scheme for a further year, with a particular onus on the public sector to demonstrate leadership by improving the energy performance of its building stock.
There are also commitments to ensuring a fair and affordable transition to a net zero carbon building stock. The government is committed to extending measures to the social rented sector and extending the Energy Company Obligation to ensure that larger energy suppliers provide energy efficiency and heating measures to fuel poor consumers.
The White Paper tackles the need to decrease the emissions from heating and cooling buildings. This largely relies on the replacement of traditional natural gas boilers with a commitment to the projected growth of electrification (air/ground/water heat pumps), green gases such as biomethane, clean hydrogen and the use of heat networks to generate heat and cooling from a central source and distribute to a number of buildings.
As regards buildings, the White Paper builds upon the Prime Minister’s Ten Point Plan. Much of the detail has been left to be addressed in future consultations but the White Paper addresses at a high level the crux of the issues that face us today. The White Paper also demonstrates that the government understands the barriers to achieving net zero by 2050 and acknowledges that the government must lead the way, both financially and literally with respect to public sector buildings in particular. Historically, where the construction industry has been encouraged to implement change it has been slow to do so. It is therefore crucial that the government stipulates the changes required and provides a support mechanism to ensure that the changes are implemented.
While there is a cost implication of most of the measures discussed in the White Paper, it is made clear that transforming the nation’s homes with improved energy performance and new clean heat solutions will also grow the UK’s manufacturing base and construction industry. The White Paper refers to a Green Jobs Taskforce with key industry bodies to produce an action plan for net zero skills across a range of sectors.
The success of the net zero approach to buildings will very much depend on the strength of the legislative backdrop. The construction sector and some manufacturing sectors have small margins and so, in order to be successful, the government will need to combine clear legislation with funding support mechanisms to require and incentivise the move to net zero. This is a real challenge, particularly given the impact that COVID-19 has had (and continues to have) on the construction sector. We look forward to seeing the commitments followed through by government.
Low carbon and renewable electricity generation
Levent Gurdenli looks at the role that low carbon and renewable electricity generation will play in achieving net zero by 2050.
The decarbonisation of the power sector has been a significant success story in recent years. In 2020, there were 48 GWs of renewable capacity on the grid, the UK went 67 coal-free days and carbon emissions from the sector were 72% lower than in 1990 levels. However, modelling suggests that electricity demand is likely to double by 2050 as a result of the increased uptake of electric vehicles and the electrification of heat. In turn, this will require a fourfold increase in the amount of low carbon generation that is on the grid for the system to be carbon net zero. In short, we need to deploy more low carbon power at a faster rate than we do today.
The government wants the electricity markets to determine the best solutions for deploying low carbon generation. To do so it needs to maintain market conditions that reduce the costs of renewable generation and to preserve a market framework that promotes competition and allows the deployment of the most cost-effective technology. How does the White Paper intend to deliver this?
The White Paper builds upon the recent Ten Point Plan and re-affirms the commitment to deploy 40GWs of offshore wind by 2030 (including 1GW of floating offshore). Unlike the Ten Point Plan, the White Paper also refers to the growth of other renewable technologies such as solar PV and onshore wind. The White Paper contemplates the Contracts for Difference (CfD) scheme as the main tool for delivering this additional capacity and it is currently looking at changes to the scheme for the fourth auction round. However, it also announces a call for evidence looking at wider changes to electricity market design to expose generators to market signals that encourage innovation and the deployment of high volumes of renewable power in a way that minimises overall system costs. The White Paper also announces the formation of a Ministerial Delivery Group to oversee the expansion of renewable power, looking at barriers to its deployment and how to remove them.
Nuclear power retains a prominent role in the White Paper. Despite objections from many in the sector regarding its cost, the government still sees it as an important part of the UK’s energy mix for meeting net zero. The White Paper commits to bringing one large scale nuclear development to final investment decision by the end of this Parliament, on the basis that the industry has to reduce the cost of new build projects by 30% by 2030. The White Paper confirms that the Regulated Asset Base (RAB) model remains the government’s preferred method for funding new nuclear projects although, notably, it does not rule out the possibility of the government providing finance during construction. Complementing this, the White Paper also focuses on advanced nuclear technologies. There is significant funding to develop Small Modular Reactors which could be designed, built and assembled in facilities in the UK and an ambitious commitment to build a commercially viable fusion plant by 2040, the latter of which could generate, theoretically, a potentially unlimited amount of energy.
In terms of other forms of low carbon generation, the White Paper commits to deploying one operational carbon capture, usage and storage (CCUS) project by 2030. This will include developing a new business model to fund its development. This model will be based on the existing CfD framework adapted so that price signals incentive power CCUS to play a role in the energy system. While not providing any real detail, the White Paper also sets out the government’s intention to look at how sustainable biomass could be deployed to achieve net zero. A biomass strategy will be published in 2022 which will detail this and the White Paper announced a “Biomass for Net Zero” call for evidence to be published in 2021 which will inform this strategy.
So does the White Paper go far enough to deliver the fourfold increase in low carbon electricity generation that is needed for our future energy system?
While the government says that it is not targeting a particular energy mix, it also says that it expects most future power to be generated from a mix of wind (particularly offshore wind) and solar power. It sees CfDs as the principal mechanism to deliver this new capacity in the near to medium term. However, it is far from certain that CfDs on their own will be enough to stimulate the deployment of other forms of renewable energy, such as solar PV and onshore wind, to achieve the 40 GW target by 2030. If not, the question is whether any additional intervention is required to ensure that the pipeline of solar PV and onshore wind projects that are currently going through the consenting system — or which have been consented — are able to be developed using an alternative route to market. The call for evidence released at the same time as the White Paper looking at long term changes to CfDs and wider electricity market design appears to recognise this is necessary and will be important in determining whether the government’s ambitious targets can be met. Funding the development of subsidy-free projects continues to be a challenge that needs to be addressed.
No doubt also that the government’s continued loyalty to new nuclear capacity will continue to generate debate. In particular, many people continue to criticise the proposed regulated asset base model on the basis that it could leave consumers bearing the costs of overruns and that it could lead to preferential treatment of nuclear development over other forms of, cheaper, renewable energy generation. In any case, it is likely that the development of new nuclear capacity will be heavily dependent on the ability to raise enough private capital to do so — which has been a challenge at the best of times.
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Energy management — Levent Gürdenli
Energy projects — Jim Jordan
Energy and utilities — Simon Colvin
Networks and regulatory — Tracy Lake