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CCC warns ‘major failures’ mean UK set to miss net zero

There are significant risks or policy gaps for 38% of the required emissions reductions needed to meet the Sixth Carbon Budget. Image: Getty.

There are significant risks or policy gaps for 38% of the required emissions reductions needed to meet the Sixth Carbon Budget. Image: Getty.

“Major failures” mean current government programmes will not be enough to deliver net zero, according to the latest Progress in reducing emissions: 2022 Report to Parliament from the Climate Change Committee (CCC).

The landmark 600-page report is the first such since the release of the government’s Net Zero Strategy in October 2021, and follows a number of key policy documents for the energy sector in particular over the course of the first six months of 2022 amid continued concerns over energy security.

It finds a mixed picture of the UK’s progress, with significant risks or policy gaps for 38% of the required emissions reductions needed to meet the Sixth Carbon Budget. But if all policy and pathways were delivered, it would slightly outperform the Budget.

“The UK is a champion in setting new climate goals, now we must be world-beaters in delivering them,” said CCC chairman, Lord Deben.

“In the midst of a cost-of-living crisis, the country is crying out to end its dependence on expensive fossil fuels. I welcome the Government’s restated commitment to Net Zero, but holes must be plugged in its strategy urgently. The window to deliver real progress is short. We are eagle-eyed for the promised action.”

Electricity generation remains a “bright spot of progress”, but in most areas assessed by the CCC there are high likelihoods of under-delivery, with energy efficiency remaining a particular sticking point for decarbonisation.

As such, “this is a high-wire approach to Net Zero” notes the CCC, but the UK must lead on climate in particular following last year’s COP26 summit. Therefore it has laid out over 300 recommendations for filling out policies over the next year, designed to help the government move from strategy to implementation.

Summary of progress against key indicators. Image: CCC.
Summary of progress against key indicators. Image: CCC.

Electricity generation decarbonisation continues at pace

One of the strongest areas of decarbonisation has been the development of the renewable energy sector in the UK, but potential barriers remain and, notably, there is a gap in policy with regard to electricity's role in other sectors such as heat and buildings and transport.

The CCC highlighted that emissions from electricity generation have fallen by nearly 70% in the last decade, with the rollout of offshore wind in particular showing that when businesses are given the right market conditions and support, they can cut costs dramatically and deploy low-carbon solutions rapidly.

Prime Minister Boris Johnson again raised the target for the deployment of offshore wind to 50GW within the British Energy Security Strategy earlier this year. The technology has been supported by the Contracts for Difference (CfD) scheme, which is largely viewed as a success, and which the government moved to be an annual process earlier this year.

Emissions from electricity generation now represent just 11% of the UK’s total, with these predominantly coming from gas-fired power plants. In 2021, emissions did increase by 10% on 2020’s levels to 48.3 MtCO2e, but this was still 8% below pre-pandemic (2019) levels, 69% below 2010 levels and 76% below 1990 levels.

This reflects the almost complete removal of coal-fired power generation from the UK’s grid, which has been in steep decline in Britain over recent years ahead of the 2024 ban, with several coal-fired plants closing over the last year, including SSE's Fiddler’s Ferry and RWE's Aberthaw B.

However, given the current concern over energy security over the upcoming winter, the government has asked a number of companies to keep their coal-fired power plants running. EDF has agreed to keep West Burton A available for an additional six months over the coming winter, on a standby arrangement.

With industry somewhat bouncing back from the pandemic, electricity demand rose in 2021 by 2% to 285TWh, although this is still 4% lower than pre-pandemic levels. Additionally, in the third and fourth quarters of 2021 residential electricity demand was 4% and 7% respectively lower than the same periods in 2020, possibly due to increased electricity costs combined with milder weather.

Despite continued growth in the renewable energy sector, generation from low-carbon technologies was 9% lower in 2021 due to weather conditions. The lowest average windspeeds in a decade led to wind generation dropping by 14% despite an increase in capacity of 5% for example.

As such, average wind load factors fell, but there is however no clear evidence that this part of a long-term trend.

Similarly, less sunshine caused a 6% reduction in solar generation, with its load factor falling to 10% compared to 11% in the previous year. Nuclear generation also dropped by 9%, although this was due to plant outages and is part of a continued decline in nuclear generation due to the UK’s reactor fleet aging.

The technology received a boost in the Security Strategy, with a new target of 4GW of nuclear capacity by 2050 announced. Following this, a new funding model – the Regulated Asset Base (RAB) model – has been announced by the government along with a number of funds.

However, there are key risks around nuclear projects over-running or becoming delayed, leading to increased costs. There is only one new-nuclear plant under construction in the UK currently, with construction of EDF’s Hinkley Point C delayed by a further six months due to the pandemic at a cost of increase of about half a billion.

The CCC’s progress report notes that while there are credible plans in place for more than half of the emission reductions needed for the electricity system to be fully decarbonised by 2035, risks remain around renewables deployment over the 2020s and nuclear.

Potential barriers include planning, network capacity, and supply chains, with limited scope to catch-up on delays created by the above challenges.

An additional point in the Security Strategy that has been welcomed by the CCC is the launch of a Review of Electricity Market Arrangements (REMA) given challenges around changing cost structures, as decarbonisation is moving Britain towards a system dominated by capital costs with large amounts of zero marginal cost variable renewable generation.

In a recent interview, Johnson pointed to market reform, calling the current system “ludicrous” as it allows the highest cost marginal generation to set power prices.

There is also a growing need to reward flexibility, which will be “critical” for integrating more renewable generation, and unabated gas must also be phased out, meaning new markets for alternative sources of low-carbon flexibility will be needed, these points will also be reviewed as part of the REMA.

The Committee has set up an expert advisory group to feed into this review, with findings and recommendations expected over summer 2022.

Networks provide significant risk to net zero

A more significant risk sits around the policy support for delivering low-carbon flexibility at a sufficient scale to balance the renewables-based system. Progress has been made in a number of areas, including the government’s commitment to support at least six long-duration energy storage demonstrators by 2025, with nearly £7 million funding awarded this year.

The government has set a target of at least one power Carbon, Capture and Storage (CCS) plant by the mid-2020, but the policy is yet to be finalised. Meanwhile the Hydrogen Strategy lacks a clear objective for the role of the fuel in the electricity system.

Over the past year, the government has published both its Smart Systems and Flexibility Plan, and Energy Digitalisation Strategy, helping to build out the role of domestic flexibility.

Additional support for tapping into this opportunity includes Ofgem implementing half-hourly settlement by 2025 and smart meter installation targets for suppliers. There are now 18.25 million smart meters installed in Britain.

For both generation and flexibility however, the networks which connect it all pose a potential barrier to decarbonisation.

They are currently at risk of not being resilient or sufficient enough to manage the growing number of connections and increasing electricity demand due to decarbonisation, according to the CCC. Network expansion and upgrades must be planned, consented and built in sufficient time to ensure they don’t become a roadblock to net zero.

To avoid this, the government must publish a strategic framework identifying the network requirements for net zero and the changes needed to ensure investment.

For offshore networks, there needs to be a strategy that coordinates the development of interconnectors and the connection of offshore wind farms to the onshore network, and prompt action should be taken to ensure regulatory and legislative changes are made.

‘Shocking gap’ in energy efficiency amid high power prices

One of the most significant areas holding back the transition to net zero in the UK is the lack of support for energy efficiency measures. In particular, given the soaring bills due to record high gas prices which have been further exacerbated by the Russian invasion of Ukraine, “there is a shocking gap in policy for better insulated homes”.

The government promised significant public spending on energy efficiency in 2019, and committed to new policies to support it in 2021, but neither has occurred, noted the CCC. Over the past decade, installation of insulation has hit rock bottom, with the average annual energy bill now around £40 higher than if rates of installation were at pre-2012 levels.

Schemes such as the Green Homes Grant – which was abruptly closed in February 2021 – have been labeled as failures, with only about 47,500 homes were upgraded, a fraction of the original 600,000 envisaged.

“Much now rests on the promised energy advice service, which must be a major undertaking that reaches millions of households and supports them through implementation of options to cut their bills and emissions,” the CCC writes.

In particular, given the soaring bills due to record high gas prices which have been further exacerbated by the Russian invasion of Ukraine, “there is a shocking gap in policy for better insulated homes”.

The Committee pointed to the British Energy Security Bill, which was almost entirely supply side leading to many labeling it a “missed opportunity” at the time. As such there remains an urgent need for action to reduce demand for fossil fuels to both reduce emissions and limit energy bills over the longer term.

“We now have a cost-of-living crisis as well as a climate crisis, and this report makes it abundantly clear that the two should be tackled together,” said Nigel Pocklington, chief executive officer of Good Energy.

“One huge piece missing in the climate jigsaw is energy efficiency. It addresses both crises head on. This government should stop mulling what headline friendly titles it can give its policies and start rolling them out with urgency.”

Action could include moving the policy costs due to historical subsidies off electricity bills and onto general public spending, and a sustained push for both energy efficiency improvements and electrification, especially in the buildings sector.

Moving the cost of subsidies into general taxation has been called for a number of times, with utilities last year calling the gas and electricity levies “outdated”. Doing so would improve electricity affordability – with a heat pump currently costing around 10% more to run than a gas boiler – and as such help to incentive to switch heating from fossil fuels to electricity.

The government is largely relying on a market based approach to the uptake of low-carbon heat, whereby it places an obligation on boiler manufacturers to sell a rising number of heat pumps. This is an untested approach notes the CCC, and as such poses a risk as market participants may not respond to incentives as expected.

A final policy plan should be published that includes a clear explanation of how the obligations on manufacturers or energy suppliers will work, what enabling legislation will be needed and a timeline for implementation. This should also include details on how the government will track if policy is driving the required market growth, and identify trigger points for further intervention.

While public opinion on heat pumps has improved with almost a quarter of homeowners stating they would consider buying one if their boiler needs replacing, only 54,000 heat pumps were purchased for homes in 2021, around 3% of households whose boilers it is assumed needed replacing.

With the soaring gas prices - which now mean climate goals could save the UK 0.5% of GDP according to the CCC - and push to move away from gas in 2022, more and more people are considering a heat pump. There is still a long way to go to hit the government’s target of 600,000 heat pump installations per year by 2028, which was announced within its ten point plan in November 2020.

The government has produced further policy support for the technology over the past year, with the release of the Heat and Buildings Strategy in October 2021, which unveiled grants of £5,000 for the installation of heat pumps as part of the a £450 million Boiler Upgrade Scheme, which went live in April 2022.

EV charging infrastructure struggling to keep up with rate of adoption

Further progress has been made in the adoption of EVs by the general public, with figures from the Society of Motor Manufacturers and Traders (SMMT) suggesting that between January and May, 92,512 BEVs were sold, a 71.2% year-on-year rise.

Indeed, adoption of EVs is already ahead of both the CCC and government growth projections, highlighting that consumers and households are willing to adopt low-carbon options when cost-effective products are offered.

The transition has benefitted significantly from the long lead time given to the automotive industry ahead of the ban on the sale of new internal combustion engine vehicles. This allowed the sector to transition, and the ban to be moved forwards to 2030.

However, the current rollout of charging infrastructure is not at the pace required to reach the 2030 target of 300,000 public charge points, and provision across the country is uneven. Additionally, as EV adoption looks to outpace the rollout of charging infrastructure, difficulty accessing it could deter future buyers from choosing EVs.

The UK Electric Vehicle Infrastructure Strategy was a positive step however, according to the CCC, but continued support, investment and focus on delivery are now important.

A further challenges comes in the form of accessibility, with EVs currently not fairly available to everyone due to the high cost and limited second-hand market. Additionally, current charging models mean it is more expensive for those without a driveway.

The government should explore ways to rebalance these costs, and provide continued incentives to choose an EV. Earlier this month, the government announced that it was ending the plug-in car grant, with it to now focus on improving charging infrastructure.

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