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All-Party Parliamentary Climate Change Group and Carbon Connect Briefing: Renewable Energy and UK Energy Infrastructure

All-Party Parliamentary Climate Change Group and Carbon Connect Briefing: Renewable Energy and UK Energy Infrastructure

30th June 2016

Renewable Energy

Renewable energy and the low carbon economy are vital to the UK’s climate and economy. A total of 11,550 businesses were directly engaged in the low carbon economy across the UK in 2013, directly employing 269,800 people and indirectly employing 190,800 people - 1.6% of UK’s workforce. The market for low carbon goods and services is already large and growing strongly, and represents an area of opportunity for UK industry – we have the potential to create a high skill, low carbon economy.

Internationally, Bloomberg New Energy Finance’s New Energy Outlook 2016 reports that renewable energy will generate 70% of Europe’s power by 2040 up from 32% in 2015, helped by the fact that the costs of wind and solar are expected to fall by 41% and 60% respectively. Investment in coal and gas generation will continue but this will be dwarfed by the investment that is to come for the global renewable sector $7.8 trillion will be invested in green power globally.

In the UK, Department for Energy and Climate Change (DECC) figures show that in 2015, energy produced from coal was 27% lower than in 2014 and coal output was at a record low. This trend looks set to continue with measures such as the phasing out of coal-fired power stations by 2025. In contrast, usage of renewable technology (largely bioenergy and wind power) grew at a rapid rate in 2015 rising by 29% from 2014 levels, meaning that renewable energy supplied the UK with a record 25% share of all electricity used over the course of the year. More broadly, low carbon electricity’s (including nuclear and hydro) share of generation increased from 37.9% in 2014 to a record high of 45.5% in 2015.

The renewables sector in the UK is growing, but many argue this is in spite of, rather than because of, Government policy. Since the May 2015 General Election, financial support for solar and biomass conversion plants has ceased and the feed-in tariff (FiT) scheme for smaller solar projects (often householders installing solar panels) has faced a 65% cut. Friends of the Earth suggest this will lead to a 90% reduction in installations of solar, with almost 1 million fewer systems being installed. There has also been the scrapping of the Zero Carbon Homes programme, the ending of onshore windfarm subsidies, the ending of funding for the Green Deal Finance Company (effectively removing financial support for Green Deal measures) and the ending of the Carbon Capture and Storage competition.

Community energy company 10:10 say that “the outlook for Britain’s community energy champions over the next few years is tough” and suggest measures including a greater focus on renewable heat and battery storage to improve the situation. In a recent consultation response to DECC the Sussex Energy Group said “Recent changes to policies for renewable energy and energy efficiency have created much policy uncertainty and this is curtailing innovation activities in these sectors”. Aggregate industries have said that “subsidy reductions are limiting the case for business investment” and that the investment requirements for grid connections mean that onsite renewables are now more difficult to justify.

It is not just the content of government policy announcements that have been a source for concern, but also the manner in which they were conducted. The February 2016 Energy and Climate Change Committee Report Investor confidence in the UK energy sector said that government policy in this area since the May 2015 has been “inconsistent and contradictory” due to “sudden and numerous policy announcements” marked by a lack of transparency and long-term vision. It went on to say that in the case of the decision to axe the CCS competition, industry was only given a one hour warning.

UK energy infrastructure

Energy projects currently account for nearly 60% of the UK’s total infrastructure project pipeline, totalling nearly £275 billion. Investment in and decarbonisation of UK energy infrastructure is vital to the UK having energy security and meeting our legal climate change obligations.

The Sussex Energy Group suggests that “UK governmental policy and markets for energy have had a tendency to focus on more traditional investors on the supply side (energy providers) and installation companies” and that the “new technologies and infrastructures” that are emerging are something that the UK government and Ofgem could do more to encourage. This was recently echoed by the Committee for Energy and Climate Change in their Low Carbon Network Infrastructure Report, who pointed out that historically UK electricity has been generated by relatively-few large power plants connected to the transmission system, but that distributed-generation capacity (largely onshore wind or solar) has risen by 54% between 2011 and 2014. The Report recommended that Government look at innovative solutions to modernize UK energy infrastructure including greater focuses on battery storage and heat decarbonisation technologies, as well as creating more flexibility in terms of funding and new sources of power.

Chair of the Committee, Angus MacNeil MP, said: "Innovative solutions—like storage and DSR— to 21st-century energy problems have been held back by legislative and regulatory inertia. The Government has committed to addressing these issues, and we will hold them to account on making good on this promise. DECC must also learn lessons from these policy lags so as to be better prepared for ongoing changes.”

Key technologies in this area are heat decarbonisation and carbon capture and storage (CCS) technology. Peak heat consumption in the UK in winter reaches levels equivalent to around 100 Hinkley Point Cs (demand which is currently met by the gas system) and approximately 50% of the energy used in the UK is used for heat. The Committee on Climate Change’s 2015 Progress Report to Parliament states that “low-carbon heat policy constitutes most of the gap between what current policies are expected to deliver and what our cost-effective trajectory for meeting the fourth carbon budget requires” and therefore decarbonising heat is crucial to meeting our climate change targets. A combination of three strategies will need to be employed to decarbonise heat: re-purposing gas grids to use low carbon gas, electrifying heating systems and introducing low carbon district heating systems on wide scale.

CCS technology is equally vital, and it has been estimated by Carbon Connect that meeting the UK’s 2050 carbon targets without CCS would cost the UK economy around £30-40 billion more each year. Similarly, DECC itself in 2013 estimated that “by 2050, CCS could provide more than 20% of the UK’s electricity and save us more than £30 billion a year in meeting our climate targets”. However, the Government cancelled the planned competition that would have ensured greater use of CCS technology and the DECC five-year-plan only once mentioned CCS.

The final key area with regards to UK energy infrastructure is the need to create greater demand flexibility, as recommended by the National Infrastructure Commission “Smart Power” Report. This energy system management method is commonplace in other countries such as Australia and the US, where it enables them to meet up to 15% of the peak demand for electricity. Demand flexibility covers a broad range of activities that can be undertaken to reduce or shift demand for electricity during peak periods, including adjusting the consumption of electrical appliances or other facilities or deploying off- grid sources of power. Demand flexibility is currently underused in the UK, fuelled by an apparent and widespread failure to properly communicate the benefits it provides.

Wider context

  • Legal - 2008 Climate Change Act means that the UK has a statutory target to achieve at least an 80% reduction in greenhouse gases by 2050 against a 1990 baseline. The UK also has a legally binding renewable energy target of 15% by 2020, as part of the EU’s overall target of 20% renewables, and the Paris Agreement commits the UK to join efforts to keep the global average temperature increase to well below 2 °C above preindustrial levels.
  • Energy Minister Andrea Leadsom MP announced during a Parliamentary debate on the Energy Bill that the Government planned to legislate to enshrine a net zero carbon target in UK law.
  •  In November 2015 Amber Rudd made her Energy Reset speech – commitments made include closing unabated coal-fired power stations by 2025, making new gas-fired power stations a priority and a focus on smart meters and energy.
  • DECC Departmental Plan  – This set out the UK's energy and environmental policy priorities from 2015-2020. Specific plans include a significant expansion of new nuclear, with the government welcoming the Hinkley power station and the proposals for new developments at Wylfa and Moorside. Smart technology will also be key with the government saying that by 2020 “every household and small business will have been offered smart electricity and gas meters”.
  • The DECC departmental plan only mentions carbon capture and storage technology once – “a notable omission”, according to Carbon 2018.

This briefing was prepared joinly by the All-Party Parliamentary Climate Change Group and Carbon Connect in advance of the short debate in the House of Lords on Renewable Energy and UK Energy Infrastructure which took place on 28 June 2016.