Within days of stressing its continuing global energy and environmental credentials, the Government has been warned that without a radical revamp it could miss its 2020 renewable energy targets by up to nine years. The introduction of hydrogen and electric cars needs to treble. And fracking has been given a cautious green light, reports Jon Herbert.

The UK’s reputation as a low-carbon energy innovator is critical to the Government’s negotiating position of Britain as a core, or perhaps quasi, European environmental leader.

It comes as less than welcome news that the National Grid warns the UK will almost certainly miss its 2020 EU renewables targets without a fundamental re-alignment. On the bright side, however, this could open up new business opportunities.

The National Grid, as an independent company, has produced four future energy scenarios covering four different energy policy approaches. Even in the most optimistic and environmentally-friendly case, it warns that the UK is falling short of its 15% renewables target.

The Government no longer emphasises that 2020 goals will be met. However, it does point to good progress as evidence that the UK continues – and will continue – to be a rewarding financial destination for inward investments designed to replace its ageing energy infrastructure.

Further warnings

However, the National Grid’s warnings go further. In response to a possible EU departure, the Government wants its self-imposed Climate Change Act 2008 to be seen as an international beacon of commitment and foresight.

But the National Grid now predicts that without tougher policies, the UK’s 2050 80% emission reduction target will also be missed.

Part of the Government’s response has been to announce an ambitious 57% carbon emissions cut between 2028 to 2032 as part of a three-pronged financial boost to reassure investors and reinforce its view that ‘climate change has not been downgraded as a threat’. More details on this later.

Its new task will be to close the gap between aspiration and delivery – a priority made forcibly by its official environmental advisors, the Committee on Climate Change (CCC).

The National Grid’ study shows that UK progress in building a wind and solar energy capacity has been more rapid than generally expected.

However, it feels that the introduction of electric and hydrogen-powered cars needs to be almost trebled, from 15 terawatt hours (TWh) to 40 TWh, if EU commitments are to be met.

An even larger challenge is clean heating systems, such as heat pumps. Heat pumps are a renewable technology that turns energy in the air, ground or water into usable low cost heat at minimal energy input all year round. The National Grid says clean heating system capacity must rise from 35 TWh to 95 TWh.

Another elephant in the national room is the little talked about problem of cutting farming emissions. Home-grown food production could be important in the future. However, the modern agricultural revolution has seen farming businesses move within a lifetime from two shire horses to dependency on 400 HP machines using fossil-fuels.

Even the Grid’s most optimistic scenario only reached renewables targets by 2022. In theory, the EU can punish nations failing to meet its legally-binding goals – perhaps a moot point amongst other fractious discussions.

Softly, softly catchee fracking

Ahead of final approval scheduled for October, the CCC has also given the Government a cautious green light to introduce hydraulic fracturing producing natural gas – fracking – subject to three stringent conditions.

The first is that carbon emissions must be strictly limited, not only during shale gas development and production, but also decommissioning of exhausted wells. Fracking is often referred to as onshore petroleum, a pointer to the regular use of fracturing technology in the wider oil and gas industry.

The CCC says emissions control will require tight regulation, close emissions monitoring and rapid responses to seal any leaks.

Its second caveat is that overall gas consumption, including new shale gas, must remain within the UK’s carbon budgets, stipulating that any shale gas use must replace an equivalent amount of imported gas. The potential gains are supply security, lower costs, plus a reduced carbon transport footprint and LNG shipping costs around the world by sea.

The CCC’s third requirement is that because shale gas production must count as part of the UK carbon budget, emission from other parts of the economy may be needed. Even so, huge uncertainties remain about UK predictions and assumptions surrounding fracking.

One point made is that the most ambitious shale gas projections by 2030 could release some 11 million tonnes of CO₂ into the atmosphere annually. However, this would only be a quarter of that from agriculture and land-use changes.

Energy balance and export potential

The CCC goes on to add that with best practice, UK shale gas could also have a lower carbon footprint than imported gas because of the huge amount of energy needed to compress gas for transportation. It wants to see close monitoring of what is happening on the ground to beef up any assumptions that fracking is currently a well-regulated industry.

The Government’s final decision on whether to allow fracking in two Lancashire sites is expected on 6 October.

With exports in mind, there are optimistic views. Newcastle University’s Professor Richard Davies has commented that, “To do what the CCC recommends, and do it transparently, could force the UK to develop the world’s best ‘smart’ monitoring technologies for emissions from well sites. There will be now business opportunities if a shale industry takes off.”

Greenpeace’s chief scientist, Dr Doug Parr, takes a different view. “The idea that fracking can be squared with the UK’s climate change targets is based on a tower of assumptions, caveats and conditions on which there is zero certainty of delivery,” he says.

Stability

In a further move to build a ‘super-competitive economy’ with low tax rates, the Chancellor, George Osborne , has also hinted that he hopes to cut UK corporation tax from 20% to 15% in the near future. This would give the UK the lowest and potentially most attractive corporate tax rate in any major economy.

His logic is that it is important for ‘Britain to get on with it’ and show that it is still very much open for business. As a further boost in uncertain times, The Bank of England has suggested that it could lower the reserves banks have to hold contingent on unexpected risks.

To steady the ship further, Energy Secretary, Amber Rudd, has reaffirmed the integrity of the UK economy and its climate change credentials, making the point that the Climate Change Act 2008 has delivered impressive investment results since 2010.

Renewable investments have increased by 42% in six years she says. During 2014, some 30% of all European renewable energy investments were in the UK. She adds that renewable development support is expected to double in the life of this Parliament to a record of more than £10 billion.

Setting energy supply security as a priority last year, followed by capacity market improvements, puts the UK in a strong position. Significant new capacity market investments after auctions later in 2016 will strengthen the UK’s position still further, she says. Beyond that, the country will continue to invest in clean energy.

This will include support for up to 4GW of additional offshore wind energy, plus other fast-emerging technologies – if operating costs continue to fall.

Another proviso is that financial support must to be targeted at fledgling and emerging renewable technologies. Industries, such as the UK solar sector, are seen as capable of standing on their own commercial legs – a controversial issue.

New nuclear fleet

A major component of future UK strategy is a new fleet of nuclear power stations, says Ms Rudd.

Despite a lack of clarity from French investors, the Government says that it has prepared the ground to develop 18GW of new and replacement capacity at six sites across the UK, led by three international consortia. These could support some 30,000 jobs and an extended nuclear supply chain.

There have also been real investments in new heat networks, such as CHP (combined heat and power), plus the wider introduction of heat pumps. The Government is also closing carbon-dirty unabated coal-fired power stations, a move praised by leaders across the world.

In the current spending session, £500 million will support new energy technologies; at least half will go to nuclear research and development at centres of excellence in Cumbria, Manchester, Sheffield and Preston. To add ginger, there will also be a competition to develop a small modular nuclear reactor.

Successful economy

As a leading environmental nation, the UK has other strengths, Ms Rudd adds. These include robust growth, record high employment, a reduced budget deficit, a culture of rule of law, low taxes, plus a talented, creative and determined workforce and a strong financial sector. These will be important in cooperation with other countries.

Amber Rudd took part in last December’s Paris talks. These included a British commitment to Mission Innovation – a global partnership encouraging greater innovation. That was complemented by the Breakthrough Energy Coalition, in which 29 wealthy investors, including Bill Gates, have pledged to invest in energy research and development.

Their aim, shared by the Government, is an energy transformation based on new reliable, clean and cheap energy technologies.

Former Labour Party leader, Ed Miliband, has urged the Prime Minister to ratify the Paris climate accord immediately. Some 180 other countries have already signed up to cut carbon emissions. His call has been supported by business spokesmen. It will be interesting to see if this is one of Theresa May’s early priorities.

Published by Croner-i on 12 July 2016