The last three months have seen a triumvirate of developments that have raised the temperature considerably for UK energy policy makers.
Those developments were:
The publication in May of the Committee on Climate Change's (CCC) Net Zero recommendation report and the UK government's response;
The publication in July of the CCC's 2019 Progress Report on the government's performance, after handing out some stark home truths last year; and
The publication (also in June) of the National Grid's Future Energy Scenarios (FES), and how it rates the government's chances of staying faithful to the promises it made to the CCC in June.
When the government publishes its long-awaited Energy White Paper later this summer/early in the autumn, it is expected to outline in detail how it intends to create a framework that will see the UK through to achieving Net Zero emissions by 2050.
The road to Net Zero
The UK's journey towards its 2019 Net Zero commitment began more than a decade ago, and has moved through a series of domestic legislation and international agreements.
The Climate Change Act 2008 introduced a legal commitment on the government to reduce long-term greenhouse gas (GHG) emissions (GHGEs) by 80% of 1990 levels by 2050. It also established the CCC.
The UK was a signatory to the global Paris Agreement in 2015, which contained a commitment to peak worldwide GHGEs as soon as possible and to restrict global temperature increases to below 2°C (preferably to 1.5°C) above preindustrial levels.
The Intergovernmental Panel on Climate Change's (IPCC) Global Warming of 1.5°C report published in October 2018 advised that limiting global warming to 1.5% is possible but would require unprecedented "rapid and far reaching" changes in all aspects of society to reach Net Zero by 2050.
Later in October 2018, the UK's Department for Business, Energy and Industrial Strategy (BEIS) asked the CCC for updated advice on the UK's existing GHGE reduction level and target date, in light of the IPCC report.
In response to BEIS' request, the CCC published its Net Zero report on 2 May 2019, recommending that the UK set a target of Net Zero GHGEs by 2050.
The UK government's response
In its report, the CCC concluded that achieving Net Zero was achievable, by 2050 but not earlier, with known technologies, alongside major changes in people's behaviour.
They pointed to a need for specific policy focus across all key sectors, including: low carbon power (x4 supply); heating (energy efficiency, insulation and low-carbon heating); large-scale carbon capture, use and storage (CCS or CCUS); and the earlier than anticipated adoption of electric vehicles (EVs).
They suggested the cost of meeting the Net Zero target remained within 1-2% of GDP.
BEIS accepted the recommendation (mostly) and introduced secondary legislation on 27 June 2019 to require Net Zero GHGEs by 2050.
It did not adopt CCC's suggestion to split the policy across England, Wales and Scotland, nor the exclusion of international carbon credits.
BEIS also announced a five-year review to ensure other economies follow suit.
The CCC 2019 Progress Report
Opening its report with a conciliatory "we welcome strongly the UK Parliament's decision to make net zero law", the committee also made the barbed observation that "there is only limited evidence of the present government taking it seriously".
Despite making bold promises to the CCC about its commitment to serious emissions reductions, it seems that the committee's patience with words in lieu of action had worn thin.
The CCC had already outlined publicly the government's various shortcomings on tackling emissions, including:
The failure to deliver all but one of last year's 25 headline policy actions (the one they managed to implement was setting out plans for ensuring a continued carbon price in the UK if the UK leaves the EU Emissions Trading System (ETS) in Spring 2019);
The failure to even partially progress ten of those 25 actions;
The fact that only seven of its 24 progress indicators are on track (or only two, if you discount the power sector);
The significant divergence in the fourth and fifth carbon budgets and a wider policy gap on emissions generally; and
Transport, buildings, agriculture and land-use being particularly wide of the mark on emissions targets.
BEIS did receive praise for "good progress in the power sector", but was chastised for being "too slow" in incentivising the development of CCUS, heat pump and low-carbon hydrogen technology and for holding back the deployment of onshore wind.
The CCC also said the UK needed to do more to provide a route to market for onshore wind and solar and concluded that government activity to date falls "well short of those required for the net-zero target".
Difficult choices for National Grid
National Grid's FES 2019 certainly did not hold back the scale of its ambition to meet the Net Zero vision.
It concluded that Net Zero "is achievable [but] requires immediate action across all key technologies and policy areas".
FES 2019 was prepared largely with the existing 80% reduction target in mind, so the bolt-on "sensitivity analysis" had to focus on additional steps to close the final 20%.
In its report, National Grid stated: "The 80% decarbonisation target can be reached through multiple technology pathways, but Net Zero requires greater action across all solutions" and "at a greater scale than assumed in any of [the] core scenarios".
It added that achieving the target also requires "coordinated policy changes" and "significant behaviour change".
National Grid admitted it had "further flexed assumptions to achieve net zero". It should be noted that its Net Zero "sensitivity analysis" only gets to 96% of the target; to get to 100% would require the development of new "commercially unproven technologies".
Heating homes: Roughly 40% of existing UK GHGEs are associated with heating homes. In the Net Zero sensitivity analysis, homes will need at least 36% less energy for heating than today. Also, all that heating will need to come through non-natural gas technology.
To achieve this, the following will be required: significant improvements in thermal efficiencies of homes (85% of homes need to be "very thermally efficient" (EPC class C) by 2050); continued improvements in appliance efficiency; immediate and large scale rollout of heat pumps (2.5 million by 2030); and the provision of heat (by electric or hybrid heat pumps) through zero-carbon electricity and/or decarbonised gas (biogas from anaerobic digestion or hydrogen).
Thermal efficiency sounds simple, but considering the age of UK property and difficulties in retrofitting insulation, improvement could be tricky and costly.
The BEIS Common Select Committee recently criticised the government's "failing energy efficiency policy", noting in its July review that government is "off track to meet its [Clean Growth Strategy] targets; major policy gaps still exist".
Generation growth: The existing "Two Degrees" scenario was already very ambitious in terms of how much generation capacity it required. Net Zero raises the stakes even further.
Total generation capacity is currently 108 GW, and FES 2019 predicts this needs to rise to 263 GW by 2050 to deliver Net Zero.
This includes a six-fold increase in offshore wind generation (from 2018 levels) and largescale deployment of small modular nuclear reactors (almost double today's nuclear capacity, and the existing fleet will have closed by 2050).
Peak electricity demand is anticipated to rise to approximately double today's levels.
Net Zero means negative zero: Not all processes can be (carbon) eliminated, so other sectors will have to get to zero and beyond.
National Grid think 37 million tonnes of CO2 will need to be removed from the atmosphere using biomass power generation paired with CCS (BECCS).
This is very exciting, but at the moment, only one pilot programme is operating in this area, capturing one tonne of CO2 per day, and it still needs to be proved that the technology can operate at scale.
The integrity of Net Zero (vs. the 80% target) rests on successful and scalable BECCS.
BECCS needs CCUS: BECCS (as a source of negative emissions) is the solution to addressing areas where carbon reduction is very difficult.
However, even the Two Degrees scenario relies heavily on CCUS being the carbon mitigant to the continued heavy reliance on natural gas.
Natural gas, currently responsible for around 40-45% of UK power generation, does not get phased out of the picture entirely, but gas as a whole becomes "biomass with CCUs" and "natural gas CCUS".
Natural gas is essential for the production of hydrogen (through methane reformation); in industry (for heating processes); and for electricity generation (to supplement increased renewable generation).
Again, CCUS technology is only really at demonstration phase and has had a chequered policy history, so this represents a significant vulnerability of the ambition.
Petrol heads to smart heads: The existing 80% scenarios already anticipated a significant move to EVs (National Grid estimate around 35 million EVs in place of petrol and diesel models), and the CCC had made the point that the ban of non-electric cars needed to move from 2040 to 2030.
National Grid recognise this requires no (as opposed to a few) conventional or hybrid vehicles on the road by 2050. They see the change as a means to provide grid flexibility and integrate a higher level of renewable generation on the system.
This assumes >75% of EVs use smart charging by 2050 (smart charging and vehicle to grid services will be key to the success of the transition to EVs) and is a good example of the necessary combination of technological and behavioural change required to deliver Net Zero.
It is also a good example of the significant digitisation of existing infrastructure – National Grid anticipate 2.8 trillion data points will be collected in 2050 to understand EV charging patterns alone.
The Net Zero sensitivity also assumes more HGVs use hydrogen as a fuel, meaning more demand on hydrogen production through electrolysis or natural gas with CCS (i.e. methane reformation).
Change the system: National Grid sees the need for far more interaction between gas and electricity markets, as they must increasingly come together in new applications – for example domestic and industrial hybrid heat pumps (that use a mix of hydrogen and electricity).
There are also significant changes within the systems – electricity generation becomes entirely zero-carbon (in fact, negative carbon), rather than the c.52% low-carbon it is today, and the balance of power shifts away from transmission connected generation (currently at 71%) in favour of more decentralisation generation (distribution connected, currently at 24%).
Gas becomes either carbon neutral (through CCS when used as a fuel at source) or is replaced by hydrogen (which in any event requires natural gas for its production).
This is why FES 2019 emphasises the importance of a "whole system" approach to energy, with new ways of designing and operating these systems coming forward.
Change attitudes: National Grid recognise the UK cannot get to Net Zero with policy and technology alone.
Its Net Zero sensitivity assumes consumers are "highly engaged in energy matters, and buy only very efficient appliances" and "use smart appliances to shift their electricity demand".
However, the smart meter roll out has not inspired public confidence, and although climate change awareness is growing, it does not yet seem to have reached the level required for consumer behaviour to play its part.
Contradictions in terms
When you compare:
The indispensability of BECCs and CCUS under Net Zero, with government policy to date on CCS/CCUS (e.g. the White Rose Project);
The importance of small modular reactor generators, with the start-stop competition to get these off the ground;
The panacea of hydrogen production as a perceived carbon-free fuel, with the fact its global production currently accounts for more GHGEs than the economies of the UK and Indonesia combined.
The importance of electrolysis in hydrogen production (as an application of the oversupply of renewable capacity or where generation is in grid constrained areas), with the fact that around 0.1% of global hydrogen is produced this way today.
The enormous generation capacity gap identified by the CCC and National Grid, against both BEIS' refusal to increase the third round contracts for difference (CfD) 6GW cap and its confirmation that it will not be reviewing its policy on onshore wind;
It is hard to be confident the policy ambition and the willingness to deliver it sit comfortably together.
This article was written by Hugo Lidbetter, partner and energy and infrastructure specialist at Fieldfisher. For more information on our sector-leading energy expertise, please visit the relevant pages of the Fieldfisher website.
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