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By Melanie Kendall-Reid, Director of Business Services
After months of waiting, the UK Government launched its white paper setting out the agenda for the energy sector and its role in tackling climate change late in December 2020. The White Paper builds on Boris Johnson’s Ten-Point Plan for a Green Industrial Revolution and outlines how the UK will transform its power and heating systems to support the 2050 net-zero emissions target. On examination, it is evident that much of the lengthy document is reiterating commitments to this agenda that had been announced earlier in the year and it provides further detail as to how the national energy and electricity mix will evolve over the coming decades.
The document is divided into six clear areas of focus which collectively aim to:
- Transform energy – building a cleaner, greener future.
- Support a green recovery from the Covid-19 pandemic – growing the economy by developing thousands of ‘green’ jobs across the country.
- Create fair deals for consumers – providing warmer homes, dealing with fuel poverty, and balancing investments with the impact on energy bills.
CONSUMERS
The Government is pledging to take action to encourage tariff-switching for consumers, making the process easier and reforming roll-over tariffs and auto-renewals which often disadvantage the consumer. A call for evidence will be published by April 2021 to begin a strategic dialogue between government, consumers and industry on affordability and fairness.
There is also a keenness to engage consumers in selecting tariffs which are more beneficial for the environment ensuring they are provided with more transparent and accurate information on carbon content when selecting new tariffs. Consideration will also be given to what market framework changes may be required to facilitate the development and uptake of innovative tariffs and products that work for consumers and contribute to net zero.
The necessity for changes to regulations to ensure that the framework adequately covers the wider market will be addressed with additional powers to regulate smart appliances to guarantee data privacy, cyber security and interoperability, ending the need to change smart meters when changing suppliers.
POWER
Wind power feathers highly in the Government plans for net-zero generation, with commitments to expand the UK’s current wind generation capability by a further 40GW by 2030, along with expanding the capacity of other low-cost renewable technologies. There is also the commitment to nuclear power with £385 million pledged to develop generation technologies and at least one large-scale nuclear project by 2024 – which is likely to be the Sizewell C nuclear project in Suffolk. The White Paper outlines financing options for nuclear, including the Regulated Asset Base (RAB) funding model, which could help secure private investment and cost consumers less in the long-term.
The commitment to one Carbon Capture, Utilisation, and Storage (CCUS) project by 2030 appears less ambitious than is being demonstrated in other countries, but the intention to stimulate a commercial market through frameworks to build a pipeline of future CCUS projects will expand on this. As part of the Prime Minister’s Ten Point Plan, more than £1bn has been set aside for state-of-the-art carbon capture storage technologies to be introduced by 2030.
Several other pledges aimed at de-carbonising the network are outlined – some of these have been detailed in previous announcements. Research suggests that around 500TWh of hydrogen-generated power could be used annually in the UK by 2050 (50% of national demand) generating £18bn for the economy and supporting more than 75,000 jobs over 15 years. The White Paper commits to kickstarting the hydrogen economy by establishing a new £240m net-zero Hydrogen Fund, a commitment that was also made in the PMs 10-point plan.
ENERGY SYSTEM
It is undeniable that the UK’s electricity and gas networks are among the most developed in the world. However, they were designed for fossil fuels. The challenge the Government faces is to adapt to new types of supply and a growing power demand by 2050. The Government will publish a Smart Systems Plan in the first half of 2021, which will expand upon the 2017 Smart Systems and Flexibility Plan to incorporate a new framework to monitor and encourage network flexibility whilst legislating to define electricity storage. It is hoped this will give much needed guidance on the regulatory and network infrastructure agenda for the next decade.
The Government will fund a Net Zero Innovation Portfolio, which will include a competition to bring to market first of kind longer duration energy storage. As gas usage reduces over the coming decades, the Government is committing to energy storage as an essential element of ensuring continuum of supply and increased flexibility. The Government will also legislate to enable competitive tendering for onshore networks construction, ownership, and operation. However, no date has been set for this.
There is much discussion on support for the roll out of a nationwide electric vehicle-charging infrastructure by investing £950m in future proofing grid capacity at services stations and other stopping areas. These improvements are essential if the charge point network is to grow exponentially putting significant extra demand on the grid. Details on how the funds will be deployed has yet to be released.
The Energy White Paper reiterates the Government’s intention to ban the sale of new petrol and diesel cars and vans by 2030, extending this to hybrid vehicles also by 2035. A further £1bn will be spent on developing and promoting electric vehicles themselves, including £582m in grants for those buying zero or ultra-low emission vehicles and £500m for the development of ‘giga-factories’ (electric car battery factories). The Government will also consult on a date on which to phase out petrol and diesel HGVs. A Transport De-carbonisation Plan will also be published in the spring of 2021.
BUILDINGS
Buildings are currently the second largest source of carbon emissions in the UK (after transport), with over 90 per cent of homes currently using gas or other carbon intensive fuels for heating, cooling and hot water. De-carbonising homes and commercial buildings therefore will be one of the most challenging and costly tasks to achieve net zero.
Commercial buildings account for the majority of private sector building energy demand, with the majority of that in rented buildings. Landlords, therefore, have a key role to play in the de-carbonisation of rented non-domestic building stock. The Government wants to achieve EPC band B by 2030 where this is cost-effective. A consultation on enforcement mechanisms to incentivise greater compliance with tougher rules will be published in due course.
The Government will also extend the Public Sector De-carbonisation Scheme for a further year, along with multi-billion-pound investments in energy efficiency measures in public buildings including schools and hospitals. Further details will be published in a new Heat and Buildings Strategy in the first half of 2021.
A Future Homes Standard will ensure that all new-build homes will be fitted with low carbon heating. For existing homes retrofitting, the Government will extend the Green Homes Grant Voucher for another year allowing people to voluntarily upgrade their home insulation or install low carbon heating before new anticipated regulatory measures come into force. The Government is to consult on a package of measures to create a long-term regulatory framework to incentivise and promote energy efficiency in homes, including increasing the existing requirements to comply with Energy Performance Certificate (EPC) measures with an aim for all homes to achieve an EPC C rating by 2035.
The Government will launch a consultation on whether to end gas grid connections for new homes from 2025. There are also plans to grow the installation of electric heat pumps from 30,000 to 600,000 by 2028 and evaluate hydrogen as an alternative to be used in household heating with a trial of the UKs first “Hydrogen Town.
INDUSTRIAL ENERGY
The Government’s policy over the next 30 years is to significantly de-carbonise the industrial sector, which still accounts for 16 percent of the UK’s greenhouse gas emissions. There are many policy developments pledged throughout the white paper in support of this aim including Carbon Capture and Storage and improvements to infrastructure.
The Government will set up a National Emissions Trading Scheme (UK ETS) to replace the EU scheme for British participants and will aim to apply an ambitious carbon price. It commits to reducing the current emissions caps for carbon-intensive industries by 5% compared to the European system.
The ETS schemes work by setting a cap on the total amount of greenhouse gases that can be emitted by energy-intensive industries; including aviation, power generation and steel manufacturing. The cap is then reduced over time so that overall emissions from each sector fall. Participants can buy carbon allowances to cover emissions.
OIL AND GAS
The White Paper sets out nine key commitments for the oil and gas industry. These are concepts or goals rather than specific policy, and there is no regulatory reform in the paper. The headline proposal is to make the UK continental shelf a net zero basin by 2050, which is not new. Although the Government acknowledges that net zero is ambitious, it pledges support to help achieve it along with greater powers for the Oil and Gas Authority (OGA) to enforce responsible environmental behaviour by oil and gas companies, so that their business plans align with the Government’s net zero target.
While the specifics of this support are not detailed, the White Paper claims that the people and communities most affected by the move away from oil and gas production will be assisted as part of the low-carbon transition. The funding for carbon capture and hydrogen are viewed as jobs that those working in fossil fuel sectors could move into, with Government support for upskilling through a ‘Green Jobs Taskforce’ and a National Skills Fund to be launched in 2021.
Many of the pledges that the Government makes in the white paper are not new either in principle or detail. Whilst there is a wealth of additional detail in the paper, there continues to be a considerable gap between emissions cuts being proposed and what will be required if the UK is to hit its climate targets.
The development of the energy infrastructure is undoubtedly much needed across the UK with a system which has evolved based on fossil-fuel use. There are many pledges which will be welcomed in this regard, including investment in the development of technologies such as CCUS and electrifying transportation as significant progress is required in the coming years to achieve what is needed.
There is concern over the inclusion of nuclear and hydrogen as forms of generation. The safety and cost of building nuclear power stations continues to be a divisive topic. Much like nuclear, there are also fears that hydrogen is not in alignment with the requirements of the net-zero transition. Research suggests that around 500TWh of hydrogen-generated power could be consumed annually in the UK by 2050 – equivalent to 50% of national demand – while generating £18bn for the UK economy and support more than 75,000 jobs over the next 15 years. Currently, however, around 95% of global hydrogen production comes from fossil fuel feedstocks.
In addition, the de-carbonisation of buildings will have a significant impact on the achievement of net-zero targets. As the second largest source of carbon emissions in the UK, focus on achieving actual energy and emissions reduction needs greater commitment and regulation. The Government’s continued reliance on the use of EPCs to measure energy efficiency in buildings fails in driving change in this area. Whilst EPCs measure the energy efficiency the building is capable of achieving, there is no requirement for change and, particularly in commercial properties, with many end users not responsible for the energy bill, there is no drive to achieve reductions. Yet again the Government is missing a vital component in achieving significant emissions reductions through encouraging behavioural change.
It is positive to see that there is progress in facilitating the reduction of carbon emissions in the UK energy system, but it is also clear that, looking forward in terms of net-zero ambitions and the green industrial revolution, there is much to do, and time is running out.
Many of our clients have been leading the way by setting their own Net Zero Carbon targets ahead of the impending government legislation. To find out how we can support your business in developing a Net Zero Carbon strategy, please get in touch to book in a complimentary consultation.
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Energy Legislation Hub: http://www.energylegislation.co.uk/energy-white-paper-an-in-depth-look-at-the-road-ahead/
