Net Zero

WHY IT PAYS TO LOOK BACK WHEN LOOKING TO THE FUTURE OF THE ENERGY SECTOR

npower Business Solutions’ head of flexibility services, Ben Spry, explains why taking a look back can help to plan the road to net zero.

2020 is proving to be a landmark year for energy. While it’s a time we will remember for many reasons – with Covid-19 resulting in shifting demand, an unprecedented coal-free spell and record low energy prices – it is also an opportunity to reflect and refocus.

With the sector now focused on 2050 and the possible scenarios that could help the UK achieve its decarbonisation goals, we thought it would be interesting to revisit the predictions we made for 2020, back in 2011.

Almost a decade ago, we worked with the Grantham Institute on Climate

Change and the Environment at the London School of Economics to model four potential energy scenarios out to 2020. Now we are in 2020, we have looked back at the predictions we made then to assess if there were any lessons learned that could help shape the future of the sector.

In a new report – The Future

Report 2020 – we gathered the views of industry experts, including author of the original report, Professor Sam

Fankhauser, Arjan Geveke from BEIS and Robert Buckley from Cornwall Insight to debate the technologies, investment and policy needed to reach net zero, and the role business will play.

In the short to medium term, the experts agreed that while the immediate attention will be on the post-Covid-19 recovery – a time when ‘cash will be king’ – the focus should also be on using the green economy to stimulate this recovery, arguing that it is an opportunity for the government to use net zero by 2050 to accelerate the sustainability projects that will cement a more resilient economic future. Longer term – net zero by 2050 is the target all the contributors were focussed on. While they agreed that it was an ambitious target, all believed that it was possible if major strategic decisions around the investment in technologies, incentives for renewables and changes to the structure of the system are taken in the next five years. CCS, hydrogen, battery storage and electric vehicles were all cited as technologies that would make the biggest impact on the UK’s decarbonisation goals. Revisiting the 2011 report has been fascinating and taught us three very valuable lessons:

1. WE CAN NEVER

PREDICT EVERYTHING

We didn’t know that the resilience we started building in 2011, following the financial crash of 2008/9, would serve us so well in 2020. And, while many of the questions we raised a decade ago have now been answered, new challenges have emerged.

There are some things that we know we don’t know yet – like the best way to effectively decarbonise heat, how the UK’s participation in the EU’s Emissions Trading Scheme (ETS) will work, and how societal changes caused by the coronavirus pandemic will shape energy consumption in the longer term.

That’s why building greater resilience and being flexible enough to adapt are now more important than ever.

2. WE NEED TO

STAY FOCUSED

ON NET ZERO

With uncertainty the most consistent feature of our social, political and economic landscape over the past decade, it’s more important than ever to stay focussed on key goals. And in the energy sector, the primary goal now is facilitating net zero.

As we said earlier, many argue that a post-Covid recovery plan that has net zero at its heart will give us the best chance of securing long-term economic and environmental stability, whatever else the future throws at us.

What’s clear is that energy – and how it’s procured and managed by businesses – will be central to achieving this.

3. BUSINESSES HAVE A

VITAL ROLE TO PLAY For this vision of a better energy future to become a reality, large industrial and corporate businesses will be required to play a key role.

We recognised the importance of their role back in 2011, as well as our own responsibility to support them – and both remain crucial today. But what actions should businesses be taking?

One of the messages from the Future Report 2011 that still rings true today advises: ‘The key is to understand and manage energy well’. For businesses in 2020, this will mean going further than energy efficiency and demand side response. It will mean setting ambitious internal decarbonisation goals and taking corporate social responsibility seriously.

Energy strategy must become an integrated part of broader business strategies – influencing business culture and transforming operations right across the supply chain. Whatever the long term future brings, the next 12-24 months will be particularly crucial, as organisations focus on getting ‘back to business’ post-COVID-19. It is becoming clear that a green recovery plan – that puts net zero right at the heart of the UK’s future economic resiliency – and policy clarity are urgently needed. As we await the Energy White Paper later this year, this is an opportunity to accelerate the projects that will cement a stronger and more sustainable future both for businesses and wider society.

To download a copy of The Future Report 2020: The Road to Net Zero visit www.energy-hq. co.uk/futurereport2020

ACHIEVING NET ZERO: WE NEED A NEW NORMAL

We are without a doubt Looking ahead to a future post the COVID-19 experiencing a period of unprecedented disruption. pandemic, TEAM Energy’s, Head of Customer There’s not one person, organisation or sector Success, Tom Anderton, considers how that hasn’t been affected; and it is only organisations will need to navigate and adapt right that the focus now should be on crisis management and immediate relief. to a new normal to meet climate targets.

We know that a healthy planet means healthy people, which supports their strategies to meet their goals with and expect energy efficiency projects to a healthy economy; so we must strained budgets and fewer resources. happen at scale to make them bankable. keep up the fight to protect it. So now is a great time to take advantage With these eventualities in mind,

The pandemic presents us with the of our reduced operations, to take stock organisations looking to the post pandemic opportunity to think about the world of where we are, what we have achieved recovery will need to consider how of tomorrow. Calls for a renewed focus and prepare for life after the pandemic to they are going to navigate and adapt to on tackling climate change have been meet our energy and sustainability goals. meet their energy and climate plans. increasing in recent weeks. As we look forward to the future, the challenge of net zero will still be there, but our means for financing and delivering the tools to fight it will be fundamentally changed. ACCELERATING CHANGE Lessons from the past have taught us that recessions can provide the opportunity to accelerate change. Now is not the time to take our foot off the pedal, but rather we should be looking for new ways of driving clean growth. THE COST OF SUSTAINABILITY RECOVERY AND BEYOND As we look forward to recovery, we have the opportunity to use the insights gained during this time to shape our new normal to prioritise energy and sustainability, and support clean and resilient growth.

There is no right or wrong answer In the conversations I have, there are two The world has changed significantly for achieving net zero. The challenges common hurdles that typically prevent energy since the start of the crisis. Businesses are different for every sector. Full leaders from investing in and fulfilling their have had to adapt quickly to new ways decarbonisation by 2050 even for heavy sustainability ambitions: time and money. of working, with many now running polluting industries such as manufacturing Yes, the cost of solar and wind much of their operations remotely. As a and transport, while ambitious, is possible. power has come down, and renewables consequence, their utilities consumption

Since legislating for net zero, the are now cheaper than fossil fuels. But has fallen and their operational emissions

Government has pledged more than £2 decarbonising is expensive, and the reality are significantly reduced. The cumulative billion in funding to support decarbonisation for many organisations that don’t have effect of this has also for many organisations, across UK sectors. Much of this will go capital reserves, is to get project funding, delivered considerable financial savings. towards the development of electric vehicle they need to be able to prove a return Where this has been successful, do we and carbon capture technologies, investment on the investment upfront. This can be a need to go back to operating in the same ways in hydrogen and green finance strategy. challenge when many energy efficiency as before? As organisations will be looking

While most organisations are prioritising measures have longer-term return rates. for low cost and resource options to support the pandemic, it can be difficult to think The second biggest challenge is their transition to net zero, this could be the about then refocusing sustainability and not having the resources. This is more no investment solution they are looking for. net zero plans. It is true though that many prevalent now as many organisations are This isn’t to say this solution is right for energy leaders might find that they have, operating with a reduced workforce. While every sector, some industries rely on people or are on track to achieve their energy we are waiting for the economy to recover, and travel. There is still the opportunity and sustainability targets this year without staffing levels may be impacted for some though to consider new ways of working that needing to do much. This has come as time, forcing energy and sustainability can support efficient operations. Behaviour the consequences of the pandemic have leaders to meet targets on their own. change programmes are particularly effective forced many organisations to reduce their With the Environmental Audit Committee at helping embed a culture of sustainability, workforce or close their doors, leading to a warning of ‘constrained’ Government training and guiding staff, customers and natural reduction in energy consumption. finances post the pandemic, there’s talk and stakeholders to adopt habits that can have But the gains from this are short term. potential for a number of financial recourse a significant impact on overall emissions.

There is also a pay-off between the benefit of this reduction against the likely hit to revenue. The pandemic will no doubt affect the available capital for decarbonisation initiatives, and budgets and spend will be scrutinised more than ever; where this is the case will these projects get the attention they deserve? There will, we hope, eventually come a time when we’re able to return to ‘normal’ and when that day arrives climate targets and net zero 2050 will still be there. But instead of picking up where we options to help bridge the funding gap. This could mean an increase in carbon taxes to create revenue for green funding or ending fossil fuel subsidies; both measures that would hit high emissions industries particularly hard. There is also the option to leverage private finance investments (PFI). It is estimated that the UK’s transition to net zero will require PFI to the tune of £393 billion by 2031. There are challenges to this though, stakeholders will no doubt OUR NEW NORMAL In a post pandemic world, the challenges to achieving climate change targets will still be the same, but the landscape against which we need to meet them will have considerably changed. If organisations are open to accepting and adapting to a new normal, the answers to net zero transition are more achievable than they have ever been before. www.teamenergy.com left off, organisations will have to adapt want guarantees against their investments,

UK ENERGY INFRASTRUCTURE – ARE WE ON THE NET ZERO PATHWAY?

Chris Paul, Partner – Energy & Sustainability group, Trowers & Hamlins LL

Earlier this year, the National Infrastructure Commission (NIC) published a report analysing the ability of the current National Infrastructure Assessment to meet the Government’s legally binding 2050 Net Zero target. It makes for interesting reading, particularly in the context of the current push towards a green recovery post COVID-19. The NIC was set up in 2015 to provide independent and impartial advice to the Government on the UK’s long-term infrastructure needs. The

National Infrastructure Assessment, which is published every five years, provides useful guidance on the longterm strategy for the UK’s infrastructure.

In its first Assessment (published in

July 2018), the NIC set out the strategy for moving to a low cost, low carbon electricity and heating system. This recommended pilot projects to test low carbon heating options (including hydrogen and heat pumps) and improving building fabric so they require less energy to heat. It also flagged the need for a radical reduction in the use of natural gas for heating.

Of course, nothing stays still for long. In June 2019, the Government amended the Climate Change Act to set a legally binding target to reduce all greenhouse gas emissions to net zero by 2050 (compared to the previous target of at least 80% reduction from 1990 levels). Given this change, the

NIC took the opportunity to review their 2018 recommendations against the Net Zero 2050 target. Their report,

which was published in May 2020, concludes that many of the previous recommendations are still consistent with the Net Zero 2050 target. It is clear, however, that some recommendations have become more urgent or need to go further that originally envisaged.

DECARBONISING POWER In its 2018 Assessment, the NIC made recommendations for the UK to move towards a highly renewable electricity system. A low carbon electricity system mainly powered by renewable energy generation was considered to provide a low cost option, comparable to the cost of building further nuclear power plants after Hinckley Point C. The NIC recommended at least 50% renewable electricity generation by 2030, and noted that the continued use of fossil fuels with carbon capture and storage was unlikely to form part of a cost competitive energy mix. The NIC also highlighted the need for a more flexible electricity system to deal with the increased use of renewable electricity (as renewable electricity generation can be variable depending on seasonal factors). This included the need for investment in technologies that provide both supply-side flexibility (eg electricity storage and interconnection solutions) and demand flexibility (eg demand side response measures). The 2020 NIC report confirms that renewable energy remains the cheapest way to decarbonise electricity. The previous recommendation for at least 50% renewable energy generation by 2030 still works with the Net Zero 2050 target, but the need for focus on the delivery of renewable energy has become even more urgent. While the NIC acknowledges the progress that has been made in decarbonising the power sector in the last decade, they highlight the need to continue that trend. They also note that future infrastructure costs could be reduced if hydrogen turbines can play a part in providing flexible generating capacity. The NIC also examined the use of bioenergy with carbon capture and storage as a source of energy. While this will not match the cost reductions or flexibility of hydrogen, the report suggests that this could be deployed as baseload generation (to generate a constant output) which could be used to displace other technologies such as nuclear.

IMPROVING ENERGY EFFICIENCY OF BUILDINGS The NIC’s 2018 Assessment recommended a focus on buildings that require less energy to heat. Aside from having obvious benefits (in terms of cost and comfort), this is linked to the choice of heat technology – things like heat pumps work best in buildings with higher insulations standards. To achieve the required levels of change, the NIC recommended that the Government should set a target for the installation of energy efficiency measures of 21,000 measures per week by 2020, with that rate being maintained until the Government has decided on the future direction of heat infrastructure (ie electrification or hydrogen). The 2020 NIC report recognises that the Government has yet to decide on the future direction for heat, but recommends that energy efficiency measures should be installed in the short term to reduce emissions and reduce energy demand. With the current focus on the forthcoming changes to Part L of the Building Regulations and the Future Homes Standard, it is important that we don’t lose sight of the retrofit challenge.

LOW CARBON HEATING The NIC’s 2018 Assessment flagged two potential options for low carbon heating – either electrification (with heat pumps increasing the efficiency of electric heating) or using hydrogen from a zero carbon source as a replacement fuel in boilers and appliances. Given the scale of the transition that is required, the NIC recommended trials of low carbon heating systems including heat pumps and hydrogen. The 2020 NIC report recognises that the more aggressive Net Zero 2050 target will require more heating systems to be replaced/ upgraded – even in buildings that are difficult to decarbonise. As this will take longer and be more difficult, the NIC recommend that the process should start earlier. The report again highlights the importance of trials on heat pumps and hydrogen heating to prove these technologies. Whichever route is adopted, it is clear that there will be real challenges to build the market and provide the necessary skills and capacity to enable the required scale of transition. POTENTIAL FOR A NET ZERO RECOVERY?

Less than two months on from the NIC’s updated report, we are already seeing the impact of COVID-19 on the UK economy. With the lockdown came the slowdown – with significantly reduced the energy demand (according to the National Grid demand is down 20%) resulting in an interesting change to our energy mix. According to reports, our remaining coal-fired power plants have not been in operation since April, and renewable energy has provided a greater share of the load than fossil fuels. Of course, this may not be a permanent change – but it provides a useful window on what a low carbon future might look like. It is clear that more investment is needed if the UK is to break free from fossil fuels. The future is a grid with more renewable energy alongside energy storage to provide the necessary resilience to cope with fluctuating generation and seasonal differences. The NIC’s report places a significant focus on the Government’s policies around energy efficiency and low carbon heating. There has been some progress in this regard, including extension of the Renewable Heat Incentive to March 2022 and consultation on the future support for low carbon heat. Current proposals include a ‘Clean Heat Grant’ (for small scale renewable heat installations in residential properties or small non-domestic buildings) and a ‘Green Gas Support Scheme’ (to incentivise the injection of biomethane into the gas grid to reduce dependence on natural gas for heating).

It is clear that the transition to low carbon presents significant challenges and opportunities. Given the scale of the work required across all sectors, it is unsurprising that many are seeing the retrofit market as way to kick-start the economy. The Prime Minister has called for a recovery that is “fairer, greener and more resilient”. To meet that challenge, the market needs more consistent policy direction for retrofit, with targeted incentives, training and investment. www.trowers.com

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NET ZERO WHY WE MUST NOT INTRODUCE A ZERO CARBON BUILDING POLICY... BUT WHY WE MUST PUSH FOR AN ACCELERATED ZERO CARBON ENERGY POLICY.

Pooran Desai OBE, CEO OnePlanet.com. Pooran has thirty years experience in sustainable development. He has been a developer as well as a consultant leading sustainability strategies for over $30 billion of zero carbon real estate around the world.

It’s déjà vu all over again. A Zero Carbon Buildings Policy is wellintentioned but misguided. We can’t afford to make the same mistakes we made last time around.

We mustn’t push to introduce a Zero

Carbon Buildings or a Zero Carbon

Homes Policy – either nationally or locally. We need one policy for energy efficient buildings and a separate policy for zero carbon energy.

This is a point of pain for me. The last Zero Carbon Homes Policy was ill-conceived and unworkable. I saw it develop and was horrified. It was not rooted either in reality or good sense.

I was not sorry to see it axed by the government in 2015 – though I was sorry to see the UK’s commitment to a zero carbon future undermined.

A building or a real estate development is not the right scale at which to push for zero carbon.

Sometimes it can be right – for example in a low-density development where the roofs can be covered in PV, but often it simply is not – for example in a highdensity urban setting. If a developer wants to construct a zero carbon building or net zero carbon building, then fine. This is why I am supportive of guidance to developers on how they might do this – for example in guidance produced by the London Energy Transformation Initiative (kudos to Clara Bagenal George for driving this and rallying support). But this is completely different from introducing a policy to force a developer to do so. Let me give you some more reasons.

First, the idea of including socalled ‘plug loads’ as part of a building’s emissions is unhelpful at best, silly at worst. The emissions from energy consumed by a building can be divided into ‘regulated emissions’ from heating, lighting, cooling and the like, and from appliances or ‘plug loads’ arising from computers, televisions, cookers, etc. Why should the building (or the developer of the building) be responsible for all carbon emissions from appliances and activities which residents, tenants or workers in the building might release, even if we knew what these would be?

Take my laptop. When I plug this into a socket in a building, why should the housebuilder or developer have had to deal with the emissions from charging it? Why not the laptop manufacturer? I take my laptop from a new net zero carbon building to an old building and it goes from clean to dirty. If I plug an electric car into my building, is it now counted as part of my building emissions? It doesn’t really make sense. Should we have a Zero Carbon Laptops Policy, Zero Carbon Televisions Policy, Zero Carbon Cookers Policy and a Zero Carbon Electric Cars Policy? Probably not, but we should have a Zero Carbon Energy Policy so that all our energy use, whether in a new building or an old one, inside or outside a building, is heading to zero carbon. Let’s get leading players across all industries rallying behind an accelerated national Zero Carbon Energy Policy so that each part of the system can then take its fair share of the costs and reap its fair benefits as we transform to a zero carbon future.

Second, building on the point above (excuse the pun), a Zero Carbon Buildings Policy is an unfair tax on new buildings and new homes. Many, if not most, of us don’t like developers, often with good reason. But to slap a blanket carbon tax on them and ask them to pay for our emissions is not right. Indeed developers will say it is an unfair tax and play it off against affordable homes – which is exactly what they did last time – creating a dangerous and unhelpful narrative: ‘Do you care more about affordable homes or the environment?’.

Third, the concept of ‘allowable solutions for net zero carbon’ which often accompanies discussions of a Zero Carbon Buildings Policy is unsound. It is the idea that the developer offsets emissions either by investing in reducing emissions in the surrounding area (e.g. by insulating homes), committing to buy green energy to cover all the buildings emissions for a set time or investing in additional renewables offsite to create a ‘net zero balance’. There are too many problems to go into detail here. But this assumes the energy modelling is correct and we know energy modelling is problematic as soon as we take human behaviour into account and with rapidly changing consumer appliances - what appliances and devices will we be using in five years let alone fifteen years and will they consume more energy or less energy than today? Then there is the problem of defining when is a renewable energy source additional. Additionality is not trivial to define. Take a wind farm: is it additional when it simply an idea, when it has planning permission but before it is fully financed, or can it still be classed as additional if it is fully financed and under construction but not operational yet? Fourth, when developers are forced to install on-site renewables, the outcomes are often not good. Developers are not energy generation

or supply companies – nor should they be. When we require developers to install decentralised renewable and low carbon energy systems we often push technology into places it is just not happy to go. Last time around we saw solar, CHP and district heating systems installed to meet planning conditions, but sometimes not even switched on. Let’s not even go into the operational and maintenance challenges. Fifth, decentralised energy will have its place, but big renewables are still the most important way to get carbon savings cost-effectively. Losses in transmission exist but they are relatively small (around 8%) compared to the sheer efficiencies and economies of scale with large renewables (e.g. a wind turbine with twice the diameter in a location twice as windy will generate 1,600% more energy). Big renewables currently account for the vast majority of UK renewable generation. Decentralised renewables remain a small (but useful) part of the mix. For example, small solar PV installations (less than 4 kW) account for 2% of renewable generation or less than 0.7% of all electricity generation in the UK 1 . Especially as we enter what will be a

1 Small scale PV accounts for 20% of solar generation, which in 2018 was 11.7% of renewable electricity generation, which was turn 33% of UK electricity generation, giving the net figure of 0.7% of all electricity.

major economic crisis, we must recognise that the big, cost-effective carbon savings are coming from big renewables such as offshore wind. We must support decentralised energy and communityowned energy, for example though incentives such as grants, but we must not push technology or developers too far beyond their comfort zone and simply waste money and make new buildings and homes less affordable in the process. The same will go for battery storage. Don’t force decentralised battery storage. Incentivise developers to put them in but recognise that the bigger future in the near and medium term is in battery storage at city and region scale as is being done in many places around the world.

So, what should we do? I want developers to focus on building beautiful homes and other buildings. These buildings must be designed to be good for people and support thriving communities where, for example, people can reduce their dependence on cars. Developers must be required to focus on a fabric first approach with a requirement to do the simple things like build to very high U-values for walls and windows to make building efficient and be required to build them with a high level of air-tightness. I want to encourage and require them to reduce the embodied carbon of materials. I want old buildings to be retrofitted to make them more efficient and to generate jobs. Completely separately, I want a decent national (and if needed city and region) zero carbon energy strategy promoting rapid deployment of large scale and decentralised renewables in a way that the renewable energy industry can delivery coherently. This will enable the energy industry to collaborate with willing developers in a way that works for both.

For me, all buildings must be energy efficient and run on renewables whether they are generated on-site or off-site. We must aim for a future where all buildings are zero carbon but this is different from a Zero Carbon Buildings Policy. All our vehicles and appliances must be zero carbon too.

So, let’s not introduce a Zero Carbon Buildings Policy. Let us not tax new buildings and new homes or try to turn developers into energy companies. It didn’t work last time and it won’t work this time. Instead let’s promote decent, energy efficient buildings and join with other industries and lobby for a coherent Zero Carbon Energy Policy. We simply cannot afford to repeat the mistakes made last time round. We neither have the time nor the money. OnePlanet.com

Originally published on LinkedIn.