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Energy transitions in the UK

By Dave Elliott

The UK energy transition is progressing quite well on the electricity side, despite on-shore wind being constrained, but less progress has been made on green heat. A new Energy Research Partnership report on decarbonising heat, Transition to low-carbon heat’, looks at the technical, social, financial and governance aspects and highlights the key actions that need to be taken now and in the next few years. ERP says that ‘supplying natural gas or oil directly into homes will need to be replaced by a decarbonised gas or by electric heating or heat network. But it is not a simple choice: each option has challenges that could limit their deployment. A combination of options is likely to be required; no one option may not dominate, as natural gas currently does. Demand reduction will be an essential part of a cost-effective transition’.

ERP goes on that ‘the scale of the challenge should not be underestimated. The social aspects are as challenging as the technical. The capital investment means the cost of heating will rise during the transition. Timing is crucial. Preparations need to begin now, to inform the long investment cycles over the next 30 years’. So it says ‘several low-carbon heating options need to be pursued in parallel now. Early in 2020s, critical actions and decisions will need to be taken, by Government, to avoid closing-off options, undermining their potential, or increasing their costs’. For example, ERP says it will be urgent to determine ‘the extent to which hydrogen could be used to decarbonise the gas system’ and ‘Carbon Capture and Storage (CCS) will be essential’.

Currently the idea of converting fossil gas into hydrogen by steam reformation, with CCS added to reduce emissions, is being talked up as much more economically viable than ‘Power to Gas’ (P2G) hydrogen production via electrolysis using renewable electricity. But that may change and if it’s surplus renewable electricity that is used, then it is essentially free. By contrast, CCS is still uncertain and likely to be expensive, with the £1bn UK programme having been abandoned due to worries about its cost. Large CCS programmes in the US and Norway have also been abandoned or cut back.

However, there are other possible routes to green heat, P2G aside, e.g. direct or stored solar heat, gas- or electric-fired heat pumps large and small, and biogas/biomass, including their use in Combined Heat and Power plants linked to heat stores and district heating networks. So there are plenty of options, and as ERP says, ‘Government support for trials of key technologies is needed now’ and ‘engagement with the public will be crucial’. Though its hope that it will be possible to identify ‘no and low-regrets options’ may be hard to realise in practice.

Some of the same themes were raised in a broader Industrial Strategy Commission report from Manchester and Sheffield Universities (PDF). It’s a little dismissive of renewables. It says that ‘wind and solar have grown very fast, but from a low base, and still supply less than 16% of our electricity, representing less than 3% of our total final energy consumption (it is important to remember that we only consume 18.5% of our energy in the form of electricity, as opposed to directly burnt oil and gas). Further rapid expansion of wind and solar is both likely and desirable, but this will bring problems from intermittency, and geography and economics will impose limits on the total capacity’.

It goes on: ‘the UK has managed to reduce its carbon emissions significantly, but we have now largely banked the easy carbon savings obtained by switching from coal generation to gas. The largest contribution to our low carbon energy supply comes from nuclear, where problems lie ahead’ – since the existing plants are being shut and the private sector-led replacement programme is slow and facing delays.

The report notes that ‘the stipulation that the nuclear new build programme should not receive direct government funding or subsidies has greatly reduced the government’s degree of leverage over the programme. Yet the government remains financially exposed through loan guarantees, and through contract-for-difference agreements. It indirectly guarantees very long-term revenue flows through commitments to the price consumers and industry will pay for electricity.’ So it wants a change. It says The government should consider taking a significant equity stake in future nuclear new build projects, and should develop the supply chains for the UK nuclear industry to ensure that UK business is able to supply a higher proportion of the highest value components of new nuclear build.’

There are signs that the Conservative government won’t want to repeat the mess that’s emerged with the funding of the Hinkley project. Labour has said similar things. However, given the increasing budget constraints, the provision of major state support for large capital projects seems unlikely, whoever is in power. And for the moment, the focus is likely to be on relatively small R&D projects e.g. on Small Modular Reactors (SMRs).  

The Industrial Strategy report certainly wants more R&D overall. It says ‘there has been a multi-decadal decline in share of GDP devoted to public sector energy research, development & demonstration’, in the UK especially. So, in the energy sector, it calls for more investment in new energy storage technologies and better demand management. Fair enough – they are key options. But it also says ‘Carbon capture and storage (CCS) offers significant potential and the government should commit to invest in the necessary infrastructures for CCS technologies to be fully utilised and provide financial incentives to make them viable’.

So once again CCS is favoured, despite being a long shot. There is still some CCS work going on in the UK (a £20m project) and elsewhere, and that may make sense if, for example, you are a devotee of its use with biomass feedstocks as a carbon negative option, but otherwise, in terms of green energy development, there are arguably more urgent options to explore – P2G especially. The government’s new Clean Growth Strategy (see my earlier post) does include, amongst other things, a £20m R&D/innovation funding for low carbon heat and energy efficiency, but that is dwarfed by the £480m proposed for nuclear R&D, on SMRs and the like. Maybe the priorities need debating further.

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