25 June 2019

The belief of many that the global community needs to act quicker and more decisively to combat climate change has been well publicised. Most recently by, amongst others, Greta Thunberg, the Extinction Rebellion and the UK’s Committee on Climate Change. The introduction of the Climate Change Act 2008 (2050 Target Amendment) Order on 12th June 2019 (the Order) subsequently represents a bold step by the UK Government to lead the way; a commitment by a generation for future generations. The Order may be one of the defining pieces of UK legislation for the next 30 years and will likely shape the UK’s energy and transport sectors, infrastructure investment and the fourth industrial revolution for decades to come. This article explores the potential implications of the net zero commitment on the three sectors currently contributing the most to the UK’s GHG emissions; Electricity, Transport and Heat.

The Net Zero Commitment: The Legal Bit

The Order itself is very short (currently just two pages long), but if passed it will amend Section 1(1) of the Climate Change Act 2008, committing the UK to ensuring that the net UK carbon account for 2050 is at least 100% lower than the 1990 baseline (effectively the UK has net zero GHG emissions). The Order appears to have, for now, strong bipartisan support in Parliament and follows on from a number of Government papers and announcements on the decarbonsatiaion of the UK’s economy including the 2017 Industrial Strategy and the Clean Growth Plan. At a time when attention is on Brexit, the Order could also have a lasting legacy (although the Government has made clear that it intends to carry out a review after five years to determine whether UK companies are suffering too great a competitive disadvantage as a result of the actions necessary to achieve the target).

While there is bipartisan support for the Order, there is little political consensus on the path, cost or level of Government intervention required to achieve net zero emissions. Based on the Committee of Climate Change’s Net Zero Report (the Report) however, the transition will require huge investment and likely involve coordinated Government policy development in all of the areas explored below.

The Lower Hanging Fruit: The Electricity Sector

The decarbonisation of the electricity sector has arguably been one of the big success stories of the UK economy and Government policy over the past 15 years. 33.3%1 of electricity generated in the UK in 2018 was from low carbon sources, and, more recently, the UK has broken a number of coal-free records. If the Further Ambition scenario in the Report is to be implemented however, 100% of the UK’s electricity mix will likely need to come from low carbon sources and low carbon generation volumes will need to at least double. The Report contains the stark statement “consistently strong deployment of low-carbon generation will be needed in order to quadruple low-carbon supply by 2050… including at least 75 GW of offshore wind”.

This will require significant investment in traditional and new renewables and almost certainly the repowering of existing renewable generating stations, increased investment in offshore wind and bioenergy, the widespread deployment of carbon capture, usage and storage technology (CCUS), the deployment of more flexible generation and storage assets, an evolution of the distribution and transmission systems (and how they are managed) and ultimately investment in new nuclear plants and potentially small modular reactors (SMRs).

Set that against:

  • the withdrawal of most low carbon generation incentive regimes in the UK; 
  • the increasing penetration of RO, CfD and FIT renewables generation in the GB electricity wholesale markets and the affect this is having on wholesale prices and the balancing market; 
  • the current state of the Capacity Market;
  • the challenges the private sector and Government are grappling with to bring forward new nuclear and SMR plants; and
  • the significant regulatory and commercial changes that the electricity sector is already undergoing, 

and it becomes clear that bold, well defined and coordinated Government policy at an early stage will be key to ensuring the public and private sectors can and do work together to make the required investment to achieve the net zero target. 

Work in Progress: the Transport Sector

The UK has gradually been trying to decarbonise its surface transport sector for a number of years, with the Renewable Transport Fuel Obligation being the historic legislative bedrock for this transition. It is fair to say though that until recently, investment in (and Government attention to) this area has not matched that of the electricity sector and the figures reflect this.

Over the past ten years, as emissions from power and industry have reduced, transport has become the largest emitting sector of the UK economy: BEIS estimated that it accounted for 27% of GHG emissions in 20172. The heightened awareness of the need for clean air and the Government’s Road to Zero Strategy has changed this, however, and the public and private sector are now rapidly trying to change and decarbonise the UK’s transport infrastructure.

The Report makes clear that this is not enough though and that if the Further Ambition scenario is to be achieved (amongst other things):

  • all new cars and vans on sale from 2035 will need to be fully electric. As commented on by many including Burges Salmon, this creates a new set of challenges including those around charging/fuelling infrastructure, but also creates opportunities for new innovative commercial structures, funding models and approaches in the automotive and infrastructure sectors; 
  • the majority of HGVs will either need to be electric or hydrogen powered, with 800 hydrogen refuelling stations being built by 2050 and 90,000 depot based electricity chargers being deployed; and 
  • emissions from aviation and shipping will need to be considered and reduced.

Again, the Government will need to lead the way if this is to be achieved.

The Great Unknown: the Heat Sector

BEIS estimates that GHG emissions generated by houses amounted to 15% of the UK’s total in 20173, with almost all of this coming from the burning of natural gas for heating and cooking. The Government has since responded by a commitment (subject to consultation) to ban gas boilers in new homes from 2025 and instead require ground or air source heat pumps to be installed. The renewed focus on district heating networks is also encouraging. The Report goes further than this though, mandating huge investment in domestic energy efficiency and proposing an entire overhaul of domestic and industrial heat generation, with hydrogen likely playing an integral role, along with electricity.

The only by-product of burning hydrogen is water and it can potentially be fed through the existing gas network to homes across the country, thereby utilising existing infrastructure (although further feasibility studies on this will be required). One of the more challenging elements of a switch to hydrogen however will be the universal roll out of electric heating and hydrogen-compatible boilers in homes. Such a transfer will be a major technical and logistical challenge, something that many believe the UK struggles with: the Smart Meter roll out being one of many examples cited.

The Report makes clear, however, that decisions by Government will be required from the mid-2020s on the balance between electrification and hydrogen in decarbonising heating, and the implications for gas networks, with large scale hydrogen production commencing at scale by 2030.

What Next?

All eyes now turn to the Government’s Energy White Paper, which is expected to be published early summer. It is anticipated that the Paper itself will focus on the electricity sector, including funding models for new nuclear, but will likely be of interest to many as it will give an indication as to whether the UK Government intends to support its commendable ambition with meaningful action and policy.     

How can Burges Salmon help?

As a market leader in UK infrastructure, energy, environment and transport, Burges Salmon is uniquely placed to assist clients with the opportunities and challenges that the Net Zero target presents. If you would like to find out more about renewables or our wider energy practice, please contact Ross Fairley

Written by: Alec Whiter

Department for Business, Energy and Industrial Strategy, UK Energy Statistics, 2018 & Q4 2018, 28 March 2019

BEIS, 2017 UK Greenhouse Gas Emissions, Final Figures, 5 February 2019

BEIS, 2017 UK Greenhouse Gas Emissions, Final Figures, 5 February 2019

Key contact

Alec Whiter

Alec Whiter Partner

  • Projects
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  • Infrastructure

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