The UK’s Green Revolution
The UK’s Green Revolution
In June 2019, the UK parliament introduced legislation committing itself to a legally binding target to reduce greenhouse gas emissions to net-zero by 2050. This would reduce the UK’s net emissions of greenhouse gases by 100% relative to 1990 levels by 2050. Despite progress over the last decade in terms of reducing greenhouse gas emissions and the increasing share of non-fossil fuels in the energy mix, the challenge before the country to meet this target is immense and would require a significant overhaul of the consumption patterns and energy usage in form as well as infrastructure. In November 2020, the government put forward its 10-point plan as well as a capital commitment, for a ‘Green Industrial Revolution’ purposely invoking the industrial revolution of the 18th and the 19th Century. Given the global upheaval of the original revolution the significance of the statement could not be lost on the audience, with its connotations of opportunity and prosperity for the nation, as well as deleterious effects on climate change and those left behind.
Subsequent policy announcements like the December 2020 White Paper, further fleshed out the plan and set up a sectoral road map to achieve the emission targets, these include the ban on new petrol and diesel cars by 2030 and the requirement of all new domestic heating systems to introduce low or zero-carbon alternatives by the mid-2030s, a process that may commence as early as 2025. In the next few months, we should see further details on sectoral and national commitments, paving the way for a high-profile announcement to coincide with the 26th UN Climate Change Conference held in Glasgow in November 2021. These may include bringing in potentially contentious carbon taxes to select sectors to influence consumption patterns akin to existing taxes on airlines and power generators.
The household sector is a key emitter of carbon, accounting for around 40% of the total emissions in the UK, where heating is essential during the cold winters. Since the 1960s, North Sea gas has increasingly been dominant in both heating and the power generation sectors. The resource has largely displaced other fossil fuels, namely coal-based town gas and heating oil. The government has in the past benefitted hugely from North Sea tax receipts and the consumer has become accustomed to a reliable and relatively cheap heating resource which has been possible with the installation of the nationwide gas grid. This cheap resource, with all its benefits, has allowed for most of the old housing stock to remain poorly insulated, which is problematic for a switchover to alternatives that require low heat loss in domestic environments.
The UK government has sought to encourage the use of cleaner alternatives like the ground and air heat pumps, solar thermal panels along with energy efficiency measures as well as low carbon energy networks which will include hydrogen compatible boilers. Heat pump technology, in particular, has rapidly improved bringing down costs, increasing reliability and heating effectiveness. Schemes like the Green Deal and the Renewable Heat Incentive have been set up to assist with the capital outlay and the promise of significantly lower running costs in subsequent years. There are several reasons why the Government may consider this an opportune time to act decisively in the energy transition. Firstly, the tremendous challenges faced by the country as the result of Covid-19 lends itself to large-scale government spending and stimulus packages to boost the economy. Renewables and low carbon energy are seen as a growth segment that can generate a significant multiplier effect in the economy with the massive investments required for the transition making it a candidate for such government funding.
Secondly, despite autonomy in decision making, Brexit will pose challenges to the UK's economy and trade and the country will look to develop sectors where it can maintain an edge over its peers as a leading knowledge-based economy. A leadership role of an ‘unshackled’ UK in the transition to cleaner energies will resonate well with the electorate and establish the UK as a valuable partner to global peers in an area of common interest, not least with the new Biden administration.
Finally, with declining domestic gas production and commensurate declines in tax receipts, the UK is increasingly reliant on piped gas and LNG from further afield. This makes disruption of supplies and exposure to potentially volatile prices an important consideration for energy policy decision-makers. The increasing role for renewable energies if implemented successfully along with nuclear power would play an important role in providing that security of supply reassurance.
Though commendable in terms of scope and ambition, the key challenge for the government, is to gain and retain the support of the electorate through the transition period and beyond. The successful displacement of natural gas in the domestic sector would in the medium to long run depend on the continued reliability and efficiency of the implemented energy technologies as well as the retail price paid by the consumer. In the short-term, public goodwill for the transformation, despite government subsidies, could be severely tested if the implementation of the changes is poorly carried out. Cases of significantly higher heating prices paid by those that have switched to district heating, bureaucratic delays in the approval process in the case of Green Deal home installation projects as well as delays in subsidy payments to contractors for works completed are not good adverts for the transition. These issues need to be ironed out as a priority. A thorough understanding of the needs and experiences of the end-user is essential and that can only happen with continuous engagement and an effective feedback loop.
Natural gas has served the nation well and will continue to play a significant role in the energy transition period. Domestic consumers who have benefitted from this dependable and relatively cheap energy resource would quickly make their discontent felt at the polls, if the implementation of the change and replacement energy offering make them worse off, which could be a potentially disastrous situation for the government and its hopes of a successful energy transition.
Mr. Praveen Martis is an Energy Consultant based in the United Kingdom. He was formerly a member of the Association of International Petroleum Negotiators.