The government's Clean Growth Strategy: does it measure up?

The government has published its long-awaited Clean Growth Strategy. So was it worth waiting for? David Blackman reports.

It has certainly been a long time coming, but the clean growth strategy was finally unveiled last week. Along the way the name has changed from emissions reduction plan to clean growth plan before settling on its current title.

When she announced the latest delay to the strategy, which is designed to show how the government will meet the targets outlined in the fifth carbon budget, climate change minister Claire Perry said she wanted the end result to be an “ambitious” one.

Liberal Democrat leader Vince Cable was quick to dismiss the strategy, dubbing it a “damp squib”, which failed to match the scale of the task needed to meet the UK’s emissions reductions targets.

The Lib Dem leader criticised the government for not embracing a more radical plan including a diesel scrappage scheme, allowing new onshore windfarms and giving the immediate go-ahead to the proposed tidal lagoon in Swansea Bay.

However, the strategy marks a change of tone from two years ago when the low-­carbon energy sector was reeling from a series of post-election cuts.

Richard Black, director of the Energy & Climate Intelligence Unit, says: “Under [former chancellor of the exchequer] George Osborne, the language was always about the costs, about Britain not doing more than other countries, as though every wind turbine came clothed in a hair shirt. By contrast, Theresa May’s government evidently sees developing a low-carbon economy as good for jobs, good for issues such as air pollution, and a route to growth for UK plc.”

However, the figures outlined in the strategy suggest that over the long term the measures proposed will not in themselves deliver the government’s targets.

They predict that emissions will decline more rapidly than they need to in order to meet the UK’s emissions reductions over the next five years when the fourth carbon budget kicks in. At this point, it estimates that the UK will have beaten its target for greenhouse gas emissions by 223 million tonnes (mT).

This primarily reflects how emissions had declined 42 per cent by last year compared with the 1990 baseline used to assess the carbon budget targets, thanks largely to dramatic reductions in coal-fired generation and the recent increase in the use of renewable energy.

However, from this point on, the reduction goes into reverse. During the period of the fifth carbon budget, which runs from 2028 to 2032, cumulative emissions will be 60mT higher than they should be. Total emissions during this period will be nearly 10 per cent higher than the budget stipulates.

Simon Virley, partner and head of power and utilities at KPMG, says: “Even with the 50 policy measures announced today, the government’s own figures show them missing the fourth and fifth carbon budgets.”

The big gaps, he says, surround energy efficiency and the decarbonisation of heat (see boxes, right).

The Climate Change Act provides the government with some flexibility when assessing whether the carbon budget targets have been met. If emissions savings targets are exceeded in earlier carbon budget periods, the surplus can be carried forward. The rules also state that the government can “borrow” up to 1 per cent from a future budget.

However, Lord Deben, chair of the Committee on Climate Change, warns the government against going down this route.

He says: “This should not be the plan. The clear intention of the UK’s fourth and fifth carbon budgets is that they are delivered through domestic action to keep the UK on the lowest cost path to the 2050 target to reduce emissions by at least 80 per cent compared to 1990 levels. That should be the goal, without the use of accounting flexibility or reliance on international carbon credits.”

So, has the strategy been worth the wait and does it meet Perry’s ambitions? ­Utility Week examines how the key changes announced in strategy measure up.

Energy Efficiency

The Clean Growth Strategy marks a renewed focus on energy efficiency.

The strategy extends the Energy Company Obligation, through which energy suppliers support home energy efficiency improvements, from 2022 until 2028. In addition, funding will be maintained at the current level of £3.5 billion a year.

The strategy announces the goal that “as many homes as possible” should meet the Energy Performance Certificate (EPC) band C by 2035, albeit with the caveat that doing the work should be “practical, cost-effective and affordable”. The government has also said it will consult on how social housing can be upgraded to EPC band C.

The strategy says there will also be a consultation next year on raising minimum energy efficiency standards for rented commercial buildings. This will take place once the independent review of building regulations and fire safety, prompted by June’s Grenfell Tower disaster, has been completed in the spring.

And in seven particularly energy-intensive industrial sectors, decarbonisation and energy efficiency plans have been published.

In addition, the strategy announces a call for evidence on how to encourage people to improve their homes’ energy efficiency, including exploring ways the government can support “green mortgage” products.

Jonathan Marshall, energy analyst at the  Energy & Climate Intelligence Unit, welcomes in particular the call for evidence on measures to promote energy efficiency. “It will be useful if they can work out how to make finance cheaper and more attractive,” he says.

However, the big gap on energy efficiency is the lack of commitment to restore the zero carbon standard for new homes, which was axed two years ago.

KPMG’s Virley worries that the government’s steps don’t go far enough. He says “Further policy action on heat and energy efficiency will be required beyond the measures announced today.”

CCS

The Clean Growth Strategy marks a volte-face in terms of the government’s approach to carbon capture and storage (CCS).

The £1 billion package of support for CCS was one of the big casualties of the government’s post-2015 election bonfire of low carbon subsidies.

However, the clean growth strategy puts CCS back on the agenda with the announcement that £100 million has been earmarked for a technology that many see as the only way of dealing with emissions from big energy-using industries. A fifth of the funding will go towards a CCS demonstration project.

The sum has been dismissed by Liberal Democrat leader Sir Vince Cable as small beer compared with the £1 billion support offered under the coalition government in which he served.

Luke Warren, chief executive of the Carbon Capture and Storage Association, takes a more positive view, while still expressing concern about the “lack of detail” in the document about how to deliver CCS.

Providence Policy managing director Keith McLean says: “The statement on CCS is fairly unambitious but it represents a significant about-turn: it’s a step in the right direction.”

The chief executive of the Energy Technologies Institute, Jonathan Wills, agrees: “It’s good that it’s back on the table. To drive costs down you need to start building, as we have seen with offshore wind. It’s not just about innovation in the laboratory.”

Heat

The biggest questions begged by the Clean Growth Strategy surround its proposals on how to tackle the decarbonisation of heating, which accounts for a third of total UK carbon emissions.

While improved energy efficiency will help, the strategy acknowledges that the total decarbonisation of heating will be required if the government is to meet its statutory target of reducing emissions to 80 per cent of 1990 levels by 2050.

However, the strategy contains few concrete measures for tackling the decarbonisation of heat, which the government admits is “our most difficult policy and technology challenge.”

The document says the installation of high carbon fossil fuel boilers in new homes as well as existing dwellings, which are off the gas grid, will be phased out during the 2020s. This will kick-off with new buildings.

It also says the Renewable Heat Incentive scheme will be reformed to encourage a greater uptake of heat pumps and bio-methane.

And the strategy proposes building and extending existing heat networks, underpinned with public funding until 2021.

However, there are no clear answers in the strategy on the big question, which is how to move heating from its current dependence on gas.

Instead, the government says it aims to lay the “ground work” for a decision in the first half of the 2020s on the best options for decarbonising the heat network.

The chief options outlined in the document are to electrify domestic heating, thus exploiting low-carbon generation sources. The other is to pump new fuels like bio-methane and hydrogen into the existing gas grid. The problem with the latter option is uncertainty over whether the existing infrastructure of pipes and boilers can take these different fuels, while the commonly identified problem with the former is that it would massively increase peak flows on the electricity grid.

Jonathan Wills, chief executive of the Energy Technologies Institute, says the strategy is right not to plump for electrification of domestic heating, welcoming the nod that it gives to the extension of district heating.

“It’s not been overly prescriptive about the solution which is crucial with heat,” he says.

Keith MacLean, managing director of Providence Policy, says that the government’s approach makes sense as long as the work is done.

Hydrogen may be the great clean energy hope, but he says that it is right not to make a more explicit commitment now.

“They are making the right noises about collecting the right evidence base: the top priority is to put in place funding for demonstration projects to provide the evidence base for decisions in the next parliament.”

“This strategy is a year late and is a damp squib. It is an inadequate response to tackling climate change, one of the greatest threats to our economy and our planet.”

Sir Vince Cable, Liberal Democrat leader



“It is startling that cheap, popular onshore wind and solar PV are excluded once again from plans for the UK’s energy future.”

Claire Mack, chief executive, Scottish Renewables



“The biggest gaps remain on energy efficiency and heat. Even with the 50 policy measures announced today, the government’s own figures show them missing the fourth and fifth carbon budgets.”

Simon Virley, Partner and Head of Power and Utilities, KPMG



“Government policy needs to set out the strategic role for the gas network, alongside the electricity grid, in meeting our climate change targets.”

David Smith, chief executive, ENA





“Although many of the policies have been announced before, and there remains a gap between the expected outcome of current policies and legally-mandated carbon targets, reaffirming dedication to cutting emissions across the country shows that the UK is not willing to give up its role as climate leader, despite recent political shocks.”

Jonathan Marshall, energy analyst, ECIU



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