Strategic Vision Needed as the UK energy system experiences a ‘Kodak Moment’
The energy system is inherently geographical; the current system is dominated by centralised points of large-scale transformation, connected spatially to sites of consumption through infrastructure that transports and transmits electricity and natural gas via the National Grid and the national transmission network. Yet this system is based on fossil fuels. To meet the legally binding targets within the UK’s 2008 Climate Change Act – to reduce greenhouse gas emissions by 80% by 2050 (compared to 1990 levels) – and the UK’s international commitments under the Paris Agreement, there must be a whole-scale decarbonisation of the UK’s economy and the energy systems that power it. This needs to take place in less than 35 years; a significant challenge requiring large-scale transformations at all points in the UK’s energy system. This process, like the energy system itself, will also be geographical in nature, with implications for landscapes, communities and the places where we live and work across the country.
The guiding principle for UK Government energy strategy, aiming to achieve the ambitious decarbonisation agenda, is the ‘energy trilemma’: the need to deliver secure (reliable), sustainable (clean, green) energy in ways that are affordable for consumers. How energy systems in the UK are evolving to meet this substantial challenge, and how this process of transformation may be affected by the UK’s decision to exit the European Union (so-called ‘Brexit’) was the subject of the most recent 21st Century Challenges Policy Forum discussion, on 29th November 2016. The event was organised in partnership with the UK Energy Research Centre. An audience of over 100 professionals from the energy sector, academics, business leaders, representatives of NGOs and policy-makers from both central and local government, met at the RGS-IBG to hear from a distinguished panel, chaired by Guardian journalist Dr Damian Carrington.
All panellists were in agreement that the UK has demonstrated genuinely progressive leadership with respect to climate change and emissions reductions, on a European and world stage. The 2008 Climate Change Act was ground-breaking as the first legally binding emissions reduction targets across the globe. The UK Government should receive credit, suggested panellist Joan MacNaughton in particular, for decoupling economic growth from carbon emissions since the 1990s. However, in recent years there have been several disappointing regressive steps in policy terms and ‘Brexit’ may prove to be similarly detrimental, not only to the UK but also to other European countries without this country’s leadership.
Undoubtedly the UK will remain connected to the EU energy system post-Brexit. The UK already has interconnectors to Ireland, France, Belgium and the Netherlands with others at the planning stage. Yet the economic uncertainty created by Brexit and the fall in the value of the pound since the EU Referendum vote back in the summer has led to interconnectors to Iceland and Ireland facing delays. These would have delivered energy generated via wind and geothermal sources, representing the least-cost route to decarbonisation in the UK. Energy companies, said panellist Joseph Dutton, are lobbying the UK Government to remain part of the single EU energy market; it is not clear whether Brexit will mean that the UK has to leave this mechanism. Doing so will be likely to push up energy prices for consumers. A worst-case scenario, suggested Joseph, would be for the UK to be affected by energy decisions made in Europe but with no power and place at the table to influence them. Norway has a similar arrangement and subsequently pays lobbyists handsomely to argue its case in Brussels.
Several retrograde policy steps have led the UK to slip down various rankings in recent years, falling from 9th to 11th since 2014 on the World Energy Council’s ‘trilemma index’ and being placed on ‘negative watch’, along with falling to 14th on the ‘renewables attractiveness index’ for inward investment, compiled by Ernst and Young. Joan MacNaughton and panellist Professor Gordon Walker particularly criticised the Government’s decision to cancel the ‘Zero Carbon Homes Standard’, with Professor Walker describing this as an ‘appalling act of policy violence’. The abandonment of the Government’s Carbon Capture and Storage (CCS) commercialisation programme was also a missed opportunity to develop a huge export sector, a decision that Joan MacNaughton said that the UK would regret as a nation.
The decarbonisation that has already been seen in the UK economy has come mainly as a result of action in the power sector. Further significant advances are required to decarbonise heating, buildings and transport if the UK is to experience further progress and is to stand a chance of meeting the 4th and 5th Carbon Budgets. Joan MacNaughton stressed the vital role of Government in providing regulation and overall strategic direction. Big strategic decisions are needed on infrastructure, argued Joan, with Government needing to demonstrate leadership now about whether, for example, the provision of heat will be electrified in the future or whether this will be delivered through repurposing the gas network for the distribution of hydrogen – produced as a by-product of CCS. Without CCS, Joan said, the UK would fail to meet its decarbonisation requirements.
Although pessimistic about progress in the buildings sector, saying that he simply could not see where progress on buildings was going to come from at the present time, Professor Walker had an optimistic message about wider transformations taking place in the UK’s energy system. The system is seeing widespread change, undergoing a ‘Kodak Moment’ as systems become ‘more local, more smart and more integrated’. These all positive, although are transitions that bring challenges with them. Energy generation is happening in radically different locations, all around us – from offshore wind arrays to small turbines on canal boats, to local projects in schools, hospitals and communities. This means that energy systems are becoming more ‘involving’; people and small businesses are playing a greater role in, and becoming more engaged with, energy systems. Related to this is that energy systems are becoming ‘smarter’. Smart meters, for example, form part of a whole new layer of infrastructure over to top of the existing energy system. Businesses and householders can know more about energy flows, and control them, whilst this technology opens up a whole world of smart appliances, with ‘alerts’ and ‘shut offs’ built in by manufacturers and energy companies to manage energy demand. Demand for energy is going down in the UK, a positive development, but needs to be faster. Gordon Walker argued that the UK needs to both decarbonise but also ‘de-energise’.
The smart meter programme was hailed by Clive Maxwell, representing the UK Government as a discussant, reflecting on panellists’ contributions, as one policy development by Government of which he was most proud. Smart systems are an area, Clive said, where regulatory arrangements need to be right; where these need to encourage and facilitate new ways of the energy system working. This is not simply about connecting homes to electricity distributors through ‘a handful of wires’ but about creating an integrated system which can lead to better ways of balancing electricity supply and demand.
Clive Maxwell identified, as did Gordon, opportunities for engaging people in energy systems. He made an interesting point about understanding people’s motivations when considering how best to ‘sell’ energy efficiency measures to them. Smart meters, for example, could appeal to people less for energy efficiency and cost-saving reasons but more as they offer the opportunity of ‘control’ over energy systems. Lessons could be learned from how double glazing is marketed: these home improvements are sold to people rarely in terms of emissions savings but in terms of increased comfort. The recent National Audit Office report into the failure of the Green Deal (introduced in January 2013 and scrapped in summer 2015) revealed a lack of engagement with consumers in advance of the roll out and limited take-up of energy efficiency measures, leading to an enrolment of only 14,000 households in the scheme. Understanding consumers’ motivations and ‘selling’ energy efficiency through tangential messaging could address these mistakes in future schemes.
Overall the panellists derived several key points that policy should seek to address in the future. Policy should understand people as no longer passive consumers but ‘active policy takers’. Government must articulate and communicate its vision for the future of energy; policy must be better coordinated, with developing synergies between heat, power and transport a priority; there must be stability for investors laying down projects now with a lifespan of 20 – 40 years; Government policy must push in a consistent, progressive direction; and finally, the availability of skills to deliver energy system transformation must be considered.
It was clear from the discussion that there is a great deal of work to be done in policy terms to deliver decarbonisation in the UK and that addressing the energy trilemma is no small undertaking. Yet there was a sense from all panellists that the recent formation of the Department for Business, Energy and Industrial Strategy offered a genuine opportunity to tackle these challenges. Energy, industry and climate change are intertwined and must be delivered in a coordinated way; it is hoped that the publication of the Industrial Strategy and Emissions Reduction Plan in 2017 signals Government’s intention to do so.