UK Energy Research Centre director, Jim Watson, calls on the government to act immediately
An important priority for the Department of Business, Energy and Industrial Strategy (BEIS) is the new Emissions Reduction Plan (ERP). The plan is required under the UK’s world-leading Climate Change Act and will focus in particular on the period to 2032.
As the Committee on Climate Change noted, there has been good progress with emissions reductions so far. This has been driven by increasingly rapid change in the electricity sector and reductions in energy demand, some of which have been due to government policies. But, as we argue in a new UK Energy Research Centre report ( Review of UK Energy Policy), this progress will not last into the 2020s unless policies are significantly strengthened in this parliament.
The ERP will have to take into account other goals of energy policy, and uncertainties due to the vote to leave the EU. Emissions must be reduced at the lowest overall cost to consumers and taxpayers, without compromising energy security. Under the May government, there will be a greater emphasis on ensuring that emissions reductions are aligned with industrial development and jobs. The co-benefits of reducing emissions, particularly in relation to improved health and air quality, strengthen the case for action.
Since the last general election, a series of policy changes have led to increased uncertainty. While policy change is often necessary, the cumulative effect has been to reduce investor confidence. Some of these changes have made it more difficult for investors in the cheapest low carbon options, such as onshore wind. Others, particularly the demise of the Green Deal, have left a policy vacuum behind.
A strategy for action
For the ERP to succeed, there must be stronger buy-in across government than in the past – including from the Treasury and Number 10. BEIS is better placed than its predecessor to deliver this, given that it is a bigger department with more clout. Policy on offshore wind offers some evidence that the ERP can be aligned with the industrial strategy that BEIS has been asked to deliver. But an offshore wind factory and a new nuclear power station do not make such a strategy. It has to be much more systematic.
The strategy can build on existing evidence to identify a portfolio of technologies and infrastructures where the UK’s future energy needs, scientific strengths and industrial capabilities overlap. It should also include the financial, legal and consultancy sectors that are already areas of competitive advantage.
As the energy system changes, a battle of visions has emerged. There is much excitement about smarter electricity systems, electricity storage, and demand side response. Caution is required, but they are likely to play an important role in a cost-effective low carbon future.
But arguments for a more traditional approach and the need for baseload power are also strong. Government and Ofgem should open up markets to enable new players, technologies and business models, while remaining vigilant about security risks as the transition unfolds. They will also have to mitigate the risks posed by Brexit – particularly the impacts on investment, interconnectors and consumer bills.
By contrast, enthusiasm for electric heat pumps to deliver low carbon heat has waned. Instead, some are advocating the repurposing the gas grid through the use of hydrogen. For this to work, hydrogen would have to be produced without significant emissions. But there is a danger of a swing to this alternative vision for low carbon heat before the merits of different approaches have been fully explored. We argue that a White Paper on Heat and Energy Efficiency is needed that includes plans for more demonstrations of the full range of options. The aim would be to learn what works best in which contexts.
These changes have significant implications for energy consumers. They are likely to be faced with new products and services, particularly after the roll out of smart meters. But people are not just consumers: they are also citizens. Many have views on the direction of travel, and an increasing number have their own generation. A more comprehensive approach to public engagement is needed that includes genuine consultation about the future shape of the energy system. This will not only make successful implementation of the ERP more likely; it will also help to address difficult political questions about the fair distribution of costs and benefits of going low carbon.
First published in the December 2016 issue of New Power
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