From the archive: Heat and transport will make the UK miss its decarbonisation targets, says UK Energy Research Centre chairman

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Keith MacLean, chairman of the UK Energy Research Centre, tells Janet Wood the biggest challenges in decarbonisation, including heat, have to be addressed and industry governance must change

The UK will not hit its decarbonisation targets, Keith MacLean tells me when we meet. “We are going to be between a third and a quarter short on energy,” he says, “and that is primarily due to shortfalls in transport and heat.” As part of his work with the UK Energy Research Centre (UKERC) he has produced a report on heat, but although it proposes how that industry could be transformed, he has concerns about whether the UK has the tools to deliver.

He says: “I have a problem with the way energy is governed. We’ve gone from a situation where nearly all the energy infrastructure in the world was built in public ownership… We have unbundled and fragmented the energy industry and the regulation and the governance… so you have multiple players in each of those areas. You no longer have organisations and people who are charged with joining it all up. We have lost that expertise.”

The Institution of Energy and Technology (IET) has suggested a ‘system architect’ where that expertise could reside, but MacLean thinks that is only part of the solution: “If the architect is dealing not only with a fragmented industry but fragmented decision-making, it is fighting a losing battle. For me it is about decision-making, design and delivery. At the moment we don’t really have design anywhere – no-one has that remit. And the other two are so fragmented that they are not really capable of doing what’s needed. That’s why you get such incoherent policy from government.”

I ask whether the Department of Energy and Climate Change (Decc) is fit for purpose and again he says that the problem is wider: “You get Amber Rudd giving her reset speech and naming carbon capture and storage (CCS) as one of three legs in the approach and then that leg gets chopped off a week later by her colleague in the Treasury.”

MacLean says there are high-level decisions about energy that have to be made by government as a whole – at times the Treasury and the departments for transport, communities and local government, and for business, will have as much involvement as Decc. At present, the Westminster structure – unlike that in Scotland – stands in the way of that: “They are beginning to set up cross-government committees to look at these things, but it’s not a cross-government way of working at Westminster in the way it is at Holyrood.

“[Holyrood] is set up so each of the civil service departments is designed to work with a number of ministers and each minister covers a number of departments, so structurally you have a far more integrated way of doing business built into the process. Here [at Westminster] everyone has their fiefdoms and it is very strict, from minister to permanent secretary through the grades.”

He adds: “Scotland has set itself clear targets and not only is the government and all its departments aligned with them, so are groups like Scottish Enterprise and Scottish Renewables, and they call themselves Team Scotland. It’s actually quite a devastating machine and you don’t want to get in the way of it, but they agree long-term targets and they keep working towards that.“

MacLean wants politicians to set targets and outcomes – and the rules of the game – and then step back and leave it to design and delivery bodies.

I ask whether Decc has the ability or the strength to do that. He says: “It sounded good that you put energy and climate change together, but a lot of emissions stayed in Defra. We ended up with the worst of Defra combined with the worst of DTI without the business discipline that remained with BIS.

“It is a relatively weak department and despite the fact that it has so much to deliver it has never really been well respected. They are doing far too much in terms of design and delivery that they are not capable of.… Their natural mentality is to try to build a lever but they don’t understand that pulling the lever has all sorts of unknown consequences, so they have to invent new levers to stop that from happening.”

“Team Scotland… is actually quite a devastating machine and you don’t want to get in the way of it.”

MacLean wants informed pan-government decision-making on issues such as carbon targets or security of supply targets, leaving bodies such as the National Infrastructure Commission to put together a long-term plan. Crucially that must include principles on where to use markets or regulation. That’s because “even if you allow the market to decide on whether it’s an electric car, a hydrogen car, a hybrid car – and the same in heat – so much depends on an infrastructure or network run by a regulated monopoly”.

Because the enabling networks take so much longer to install than the individual assets, a different approach is necessary.

MacLean recalls the upgraded Beaully to Denny transmission line on which so many renewable energy projects rely. It has been in process since 2001. If infrastructure is a 15-year process “you have to make decisions and have programmes in place”, he says. Equally important, keep the options open if multiple infrastructures are likely to be available.

His recent report on heat includes an example in the gas distribution networks’ iron mains replacement programme. Old mains will be replaced with plastic ones, which will be long-lasting and can be used to transport hydrogen. That option was not in the plan. MacLean’s point is that the pace was determined as “a practicable rate that we can do, getting the supply chain in place and maintaining it over a period. Looking at the traffic disruption and the physical parameters of digging up the roads and doing the connection work and so on. That’s the sort of thing we need to have in place for so much of energy delivery.” That might seem too cosy, but the ability to rely on a long-term programme to build a supply chain is a key demand of new industries like offshore wind and PV.

At the moment, says MacLean, in those new industries, as in so many other parts of the industry, “because Decc is involved in the day-to-day decision-making of everything, the decision-making becomes day-to-day as well – and from one week to the next”. He adds: “There has to be a much longer-term approach.”

What form does MacLean’s delivery body take? It doesn’t include the system architect, he says – its job is design. I ask whether the architect is a step back towards centralised decision-making, but he denies that, saying the national architect should be built up from local architects. “The delivery body could be along the lines of Ofgem… policing the delivery.” With that in place, delivery “would be very much by the private sector, with auctions if that is the best way”.

He says reports from the Energy Networks Strategy Group are “a really good example where all the relevant parties got together and looked at the likely developments and the upgrades that are needed regardless – the low-regret measures”. With no-regret measures going forward – possibly through Ofgem’s new Competitively Awarded Network Owner (CATO) approach – the designer would look at ‘trigger points’ for the next investments, so “we know that as soon as the trigger is there, we will get on and build it. In the meantime we will design it, spec it, go to the market to be ready.” MacLean wants that sort of process at both national and local level.

“If the government… don’t like what the market decides, they intervene again to try to get the answer they wanted. Let’s be honest: what are the boundary conditions?”

He is suggesting a patchwork approach. The heat report has an example: the gas distribution network can be repurposed, but converting the entire network – to green gas, say – is not practicable or necessarily desirable. Instead, he says: “That’s the local decision-making and the zoning we recommend. A local authority working with their local architect ‘zones’ its area – what would be suitable for district heating, what might be hydrogen and what would be done through electrification. You can then start designing how that looks in those areas – that’s the local architect’s job – and then delivery is policed by the regulator.”

That would be far better for delivery, he says, whereas “we now have a system where the government determines exactly what is built”. “If they don’t like what the market decides, they intervene again to try to get the answer they wanted,” he says. “Let’s be honest: what are the boundary conditions?”

With local options in place, he thinks regulation will drive household change.

His example is gas boilers. One and a half million boilers a year were switched to condensing boilers to meet new regulations. In future that could allow for a heat pump or a hydrogen boiler, or a heat exchanger for a district heating system. But MacLean says “the regulation has to be put in place that says from 2025 you can’t put in a gas boiler, you have to move to these things, there has to be a transition period”. So the options are determined by whether your area is in a hydrogen network (one is being trialled in Leeds), has district heat or green gas, or relies on electric heat.

Does that fit with a “consumer power” future in which customers suddenly boost the takeup of PV, or electric cars? “That’s why the rollout has to be more about he local delivery and the appropriate time,” he says. “If it is regulated, it has to happen in a timeframe.”

A very different market

MacLean says energy is out of the news because the wholesale price has gone down: “The volatility of the price of carbon fuels is one of the good arguments

for moving towards other technologies that are more dependent on the capital cost, because once they are built you know pretty much for the next 20 years what the cost will be.”

He sees fundamental changes in pricing structure coming: “We are almost at the point where you could charge a fixed price and manage the risk in a way you never could when we had coal-fired power stations and coal for heating.

“You could develop an energy industry that is similar to telecoms – where you don’t have trading and exchange of Mbytes and so on because so much is dominated by the physical infrastructure and its capital cost. Telecoms is a much better model for electricity and heat infrastructure and where it is likely to go.”

That’s a very different direction from many views of the future, which forsees consumers reacting to price signals to help balance the system. MacLean says that is “based on the system we used to have rather than the system we are building”.

He says prices could not vary enough to get individuals to respond: “I don’t think even with time-of-day pricing we would be allowed to use punitive pricing. Look at how National Grid is struggling to get demand-side response (DSR) despite all these people saying it is there. How many customers has Tempus got? It’s not really changing the world.”

He says it makes more sense to do it with aggregation and automation. “If you say to a consumer you will take £100 off the bill [to change usage] it’s a one-off decision and £100 is quite attractive. It’s the only way we will get significant DSR in electricity.” The same approach could also be used for heating, which is a bigger expenditure in many homes.

“Telecoms is a much better model for electricity and heat infrastructure and where it is likely to go.”

That is an important reason why in the heat report he comes back to hydrogen as a replacement for gas in the energy system: he says we have not recognised how much inherent storage we will be losing. “Storage is the key to balancing supply and demand and in the past we had a very variable demand – especially in heat – and we have storage including flexible supply chains that allow us to manage the demand. A vast amount of the storage we use to balance the system at the moment is in the fossil fuel system – so it’s in the supply chain, or physical storage somewhere.”

Although there are small opportunities to use heat for storage, MacLean says the numbers don’t add up. In the past we had 50,00-60,000 GWh of storage in gas and 20,00-30,000 GWh of storage of coal at any one time. In all the hot water tanks across the country we have about 70 GWh, and all the pumped storage across the country totals 27 GWh. “It’s 3-4 orders of magnitude more to even get in a position where we have balancing that deals with current demand and production patterns,” he says. His argument is that “moving to a situation with intermittent and inflexible generation – you probably need more storage” and that’s why a vector like hydrogen makes sense.

Without an option like hydrogen to soak up excess power and transport it or convert to electricity at the right time, he sees real problems with operating the network. With it, “you immediately have a means of dealing with overproduction that we don’t really have at the moment,” he says. “It would be turning up demand to create something useful… [hydrogen]would be three times as expensive as gas to store but that is £60-90 – and it could be stored in the facilities we now use to store natural gas.”

“National Grid is struggling to get demand-side response despite people saying it is there.”

A hydrogen infrastructure to support transport, heat and excess power is “a nice flexible tool that may not be the whole solution but is a nice glue that holds it together.” He admits that at the moment, “it’s only beginning to get traction as something that could help with transport and heat”. But it is important to consider it, because “if you are designing the whole [energy] system you may take a different view than if you are just optimising the electricity part.”

But although MacLean talks about the importance of storage, he is less convinced we are taking the right route to develop it. He says poorly designed regulations – like imposing grid charges for both producing and using power, instead of treating storage as a service to the grid – must change. But beyond that, “often the problem is that people are trying to find a reason to use storage rather than trying to use storage to solve a problem”.

“The market is actually sending some pretty good signals… There are a few areas where the market is signaling that storage would be good [like] frequency response. But [like some other sectors] they feel… government must create the right subsidy to support their product. But if it’s not a good solution for solving the problem, they shouldn’t be creating a market for it.”

The future of heat and the gas grid

As chair of the UK Energy Research Centre, Keith MacLean has been focusing on an energy policy gap – how to decarbonise heat. That, he says, is one of the biggest challenges in moving to a low-carbon economy, yet in the past it was often dealt with in “one line” in policy documents: decarbonise the electricity sector and convert gas heat to electricity. Similarly with switching to electric vehicles.

MacLean says it “annoys me that [Hinkley] gets all the attention and mainstream journalists have no interest in heat. If you look at a diagram in the report at peak winter you would need 100 Hinkley Point Cs to meet peak demand. And that’s an issue that we think is boring and one that we can just leave to sort itself out, when we can’t even get one Hinkley Point built.”

He says models where heat is just one line – “job done” – after decarbonisation of electricity “are not seriously thinking about the cost and impact of the pipes, the wires and the cables”.

Labour shadow energy minister Alan Whitehead talks instead about decarbonising the gas grid to meet heat needs with a mix of hydrogen, green gas and district heat. MacLean partially agrees, but says it needs a local approach: “In practical terms you wouldn’t put all the options into the same grid because it would be such a massive upgrade of the infrastructure. It makes more sense to convert one area to run 100%. You might have 20% of areas on 100% hydrogen and 20% of areas on biogas.”

He thinks the biogas contribution is limited “because there are such concerns about biogas and biomass over sustainability – and about how much volume can be produced. Scaling up from the few per cent we have now to the tens of per cent we need doesn’t seem feasible. That’s why we are struggling with biofuels for transport too.”

Read this paper and others on transforming heat

New nuclear? Heat decisions are more important

Although MacLean talks about the need for clear decisions from government, he names Hinkley Point C as an example of where even a government decision “doesn’t mean it can get delivered”.

On whether the project will go ahead, he says: “Up until a few weeks ago I thought it would only work if the French government underwrote it all. Then a few weeks ago these new problems with technical quality and certification from Areva became the final nail in the coffin.”

Could another nuclear plant design use the site? “If you started the race now I am sure they would get to the end before EDF would and there would be lower technical risk. It would make more sense to get existing tried-and-tested technology.

“I see no sense in continuing to back the EPR. Not even the Chinese have been able to get theirs to operate, and neither Flamanville nor Olkiluoto are anywhere near finished.”

Keith MacLean completed graduate and postgraduate studies in chemistry at Heriot-Watt and Hamburg universities. After working in chemical and research companies in Germany and Scotland, he spent 20 years at SSE where he ultimately became policy and research director. He is industry chair of the Energy Research Partnership and was appointed chair of the UK Energy Research Centre in December 2014.

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