To mark the publication of a major new report on the future of the UK energy system, ADE's Tim Rotheray argues a more user-led energy market could prove critical to the success of the net zero transition.
My twitter feed is increasingly filled with reports and commentary on two huge areas of political debate the widening gap between the rich and poor and climate breakdown. It came to a head in a recent UN report which signposted a future climate where the rich buy themselves out of the worst effects and the poor suffer the worst impacts1.
The legislation that puts Net Zero emissions into law passed just last week and was based on advice from the Committee on Climate Change (CCC). While the CCC’s advice that ‘Net Zero is possible’ achieved the headlines, a new and fascinating comment was also made – the need for a ‘just transition’. A transition which ‘protects consumers and vulnerable workers’, which is ‘fair and is seen to be fair’2.
One approach to a fair transition is through carve outs for particular groups such as the winter fuel payment for the elderly and tax reliefs for Energy Intensive Users. Doubtless, these have a role to play but could policy also harness those users to drive the transition?
What if policy could drive the energy user to enable them not just to cut their emissions but facilitate the wider transition; by helping keep the lights on, supplying their neighbour with power or their local community with heat. What if those users could get a cheque as well as a bill for their energy? What if those who bear the cost of the energy system also become its beneficiaries. And what if by doing that the cost of the entire transition to a net zero economy could be cheaper and faster?
That is the contention of a review of the latest analysis of routes to a low and zero carbon economy by Association of Decentralised Energy. Local energy, produced and managed by the user is an increasingly important and growing part of the energy transition. Small rooftop solar now has the same capacity as two large power stations and that sector has grown by 330% while large central power generation has fallen by 8%. Hospitals, schools and heavy industry captures wasted heat from power generation at over 2000 sites meeting nearly 7% of the UKs power needs and cutting 10 million tonnes of CO2 a year3 Heat recycled from sites as diverse as rivers, the sun and waste to energy plant is now supplied to half a million households as well as public and commercial offices. And, contrary to popular belief Britain’s energy demand has been falling not rising – as a result of more efficient buildings and appliances.
Much of the focus of the energy debate sits around large power generation – ‘how much offshore wind do we want’ and ‘do we need nuclear’ but the next phase of decarbonisation has to come from the built environment and local energy. It is probably technically feasible to build an ever-larger grid and more power generation and move all customers to electricity for their needs without involving them. But the National Infrastructure commission estimated that a traditional approach would cost consumers £8bn a year extra. That’s over a £100 per household let alone the impact on the competitiveness of British Industry.
By contrast moving towards a more user-led system, where energy customers are enabled to participate in the transition could not only avoid costly system upgrades it could save money. Six billion pounds off bills for businesses and savings of up to £400 a home from increased efficiency. Smart energy management to move consumption away from times of peak demand could save customers £780m a year cutting peak energy use (when power is at its most polluting) by 5%. Locating power plants at industrial sites such as combined heat and power, capturing otherwise wasted heat, could increase to 15 GW, the equivalent of more than 7 large power stations. Recycling of waste heat through heat networks will have a key role delivering clean, green cities heating 1.5 million homes by 2030 rising to 5 million by 2050
Such a decentralised user-led system is completely achievable. But it needs a change of mindset from central to user led thinking. It needs a political determination that every home, every town and every business will be given the tools to help deliver a low carbon energy system. Understanding that energy is ultimately a means to an end – mobility, manufacturing or warmth. Some ways to make this happens are opening up all electricity markets to energy users so that they can compete with power stations and enabling cities to attract investment in heat networks to recycle local waste heat just as we have for power and gas.
Seen through the lens of the user, decarbonising the economy is a tremendous opportunity for embedding a more just system. With just over a 30-year window for all emissions to be removed from every aspect of our society, it is those in power now and for the next 5 years who will set the policy trajectory which will determine if we hit the new Net Zero goal. For decision makers putting the user back in control transforms energy customers, from passive to active beneficiaries of the transition; it is the central way to secure a popular mandate for the most ambitious economic transition in our history. And it has to start now.
This article originally appeared as a blog on the Business Green website on 3 July 2019.
[iii] Digest of UK Energy Statistics, Chapter 7: Combined Heat & Power, 2018