With 2018 marking the 10-year anniversary of the Climate Change Act, there was always going to be good chance that this year’s Committee on Climate Change progress report was going to land with a splash.
The 2018 report has certainly given us all a lot to think about. Striking a balance between celebrating the successes of the last ten years whilst sounding a warning siren about gaps in policy relating to the fourth and fifth carbon budgets, it sends four clear messages to government – make sure you are supporting the lowest cost options; commit to regulation that can drive change; deliver stability in policy and act now on developing national infrastructure.
Since 2008, Britain’s energy networks have played an important role in the UK’s decarbonisation success story – and have an important role to play in helping policymakers act on those four messages in the future.
A rapid decentralisation of electricity generation, largely driven by solar PV and onshore wind deployment, has been key to delivering the 75 per cent reduction in power sector carbon emissions since 2012, with a quarter of all electricity in Britain now being generated locally at distribution level.
This has created operational challenges for network operators around how they manage a system where electricity no longer just flows in one direction, but in many directions. Operators have not only risen to that challenge but have done so whilst improving levels of network performance and delivering higher standards of customer satisfaction.
So what role might energy networks play in helping the government act on the CCC’s four messages?
Energy network innovation projects have played an important role in not only meeting the challenges to date but also in developing their understanding of what opportunities they create too. They have helped shape the move towards a new distribution system operator (DSO) model for local electricity networks, under which network operators will become a smart platform that will enable a whole range of new energy technologies that generate, consume and manage electricity.
Under this new model, the technologies that are vital to meeting our 2050 decarbonisation target will become assets for running our networks in a smarter, cleaner and more efficient way. They will enable new flexibility markets for services such as peer-to-peer trading, demand-side response and vehicle-to-grid to give network operators new options beyond simply building new infrastructure.
That is key to keeping the cost of accommodating technology driven change as low as possible whilst providing consumers with new opportunities to directly benefit from the technology they are using.
Policy and regulatory stability has been key to this success and we need to build on that track record. Since it was introduced in 2013, the RIIO price control system has worked and worked well, and around the world it is now looked on as a leading example of energy network regulation.
Network companies are incentivised not just to invest but also to innovate, which is vital as the very DNA our energy system changes in response to decarbonisation.
As we have seen from the changes at a local electricity distribution level, network operators are provided with the clarity they need to pursue projects, helping the government deliver on its decarbonisation policy. More attention should be paid to the important role that gas distribution networks are playing under this system.
As we move beyond tackling the decarbonisation of power generation to the trickier challenge of decarbonising heat and transport, gas networks are exploring much needed policy options by connecting bio-methane plants as well as running innovation trials involving synthetic natural gas production, blending of natural gas and hydrogen and exploring the use of city-wide full hydrogen networks, such as the Leeds H21 City Gate project.
If our power, heat, transport and waste sectors are all interdependent, then so must be the solutions for their decarbonisation. Operating energy network infrastructure is a capital intensive business and it is vital that investment is delivered in the most efficient, cleanest way possible.
Using decarbonisation policy to develop a “whole system approach” is key to ensuring that is the case. This approach is based on our gas and electricity networks using the latest low-carbon, smart technologies together in an integrated way and by looking at optimal network investment, planning and operational decisions for the whole energy network, not just the individual parts in isolation.
It is also the most cost-effective way to meet the challenge of decarbonisation. KPMG research conducted on behalf of ENA has shown that a scenario based on evolving both our gas and electricity networks to help decarbonise our economy could save consumers as much as £214 billion by 2050 compared to a full or near-full electrification scenario.
Over the last 10 years, the UK’s decarbonisation framework has had a transformational impact on the way our energy system works. But those 10 years have just been the beginning of that decarbonisation process, and the next 10 years promise to be more challenging than the last.
Our energy networks have a vital role to play in meeting those challenges in whatever form they may take – and in creating new opportunities for the future.