This week, the government launched its long-anticipated Energy White Paper, detailing its route to powering the UK economy net zero by 2050. Importantly, it sets out a vision for an affordable and feasible energy transition, facilitated by collapsing costs of renewable energy and continuous technological developments. But what is the vision?
The white paper first sets out how consumers will be protected, acknowledging that the phasing out of gas boilers and the transition to electric cars will make electricity the primary source of our consumption of energy. Such a transition creates concerns among some about the costs of such electricity and whether the national grid can grow its capacity while also decarbonising on track for net zero by 2050. The government’s answer is two-fold. Consumers will be protected from risk of higher prices by the Energy Company Obligation (ECO), the expanded Warm Home Discount (WHD) schemes, and the Green Homes Grant, providing financial support of at least £6.7 billion over the next six years. The white paper also sets out an increased focus on promoting cost-lowering competition and on schemes to improve the energy efficiency of homes. Smart meters, which tell consumers when there is peak demand and which reward these consumers for reducing consumption at peak times, will also play a key role in the ability of the energy grid to cope with demand surges, ultimately reducing costs for consumers further. To encourage adoption of this mutually beneficial technology, the government has introduced a new smart meter obligation on suppliers, starting in July next year.
Impressively, already a third of the UK’s energy generation comes from renewables. Recent growth looks only to accelerate as green energy increasingly becomes the cheapest option. This week's white paper signals an ambition for the phasing out of coal to be brought forward to 2024, subject to a consultation’s outcome. This phasing out of dirty power sources in tandem with energy demand expected to double in the UK by 2050 creates a challenge, however: how to achieve a much greater capacity of renewable energy?
A wider push for transparency and competition in the energy sector is part of the government’s answer. Heightened competition will only grow energy firms’ investments in cheaper renewable technologies, reducing the cost of green energy further and thus making fossil fuels the economically illiterate choice of energy companies well before 2050. Free and competitive markets will be pivotal, therefore, in delivering the renewables infrastructure, while also providing tens of thousands of high-value jobs across the country, particularly in the North. The white paper sets out the government’s understanding of the importance to continue schemes such as the Capacity Market, which provides a financial incentive to energy firms for building sufficient energy capacity for surges in peak demand. Auctioned across energy suppliers makes this an effective and low-cost mechanism for the government to avoid any energy grid reliability issues.
Facilitating and promoting the energy transition, the government has pledged to hold CfD auctions every other year from late 2021 for wind, solar photovoltaics and other established technologies. The success of CfD auctions for offshore wind signals the willingness of the private sector to build out the UK’s renewables infrastructure, signalling also the value of such a dynamic, Conservative Party-led economy to the fight against climate change.
Tackling further concerns over supply reliability when we lack sunlight or wind, the government’s decarbonisation strategy looks to energy-from-waste plants and biomass as sustainable alternatives to fossil fuels, but ones that are able to provide a reliable energy supply. Coupled with greenhouse gas removal technologies (GGRs), such energy generation is both sustainable and relatively clean when used as a component of a diverse and broad energy mix.
Opportunistically, the government also sets out how it aims to make the UK a global leader in and exporter of renewable technologies. The £160m funding set out in October to support the development of port-side infrastructure will attract inward investment and grow the UK’s manufacturing base for renewables, carving out a lucrative export market that will only grow over the next few decades. The opportunity for levelling up and economic growth thanks to the energy transition is once again evidenced.
Finally, the government looks to carbon capture utilisation and storage (CCUS) as a further decarbonisation mechanism. While many CCUS technologies are nascent, they could provide an effective and faster route to net zero once commercially viable. An investment of £1 billion by 2025 has been pledged towards CCUS clusters, working towards an ambitious target of capturing 10MtCO2 per year by the end of the decade. While such technologies appear a way off, their development could solve the issue of achieving complete reliability and full capacity from renewables alone by 2050.