The new year is a time for making fresh starts. The silver lining to the cloud of uncertainty created by Brexit is that the decision has forced the UK energy sector to take stock of its low-carbon achievements to date and look afresh at its direction of travel. Over the past decade, the UK, as part of the European Union, has made good progress in the development of renewables, and this momentum must be maintained. Moreover, leaving the EU also has the potential to open a number of new doors for us. Now is the perfect time for the sector to grasp the opportunity to refocus our low-carbon efforts to meet the country’s long-term energy needs.
With many of the hoped-for policy decisions on renewables deferred from the chancellor’s autumn statement, here are three key recommendations to the Department for Business, Energy and Industrial Strategy (BEIS) for the next budgetary announcement to strengthen the UK’s energy landscape.
Invest in infrastructure
It is vital that in 2017 we take urgently needed steps to create a more robust national grid to serve the UK’s business interests well into the future. Enabling National Grid to adapt to the modern distributed energy generation system should be a priority, because infrastructure is ageing and already struggling to adjust to the integration of renewables. This strain on the network is only set to increase as our power demands continue to rise and rapidly emerging electric vehicle technologies present a real and imminent challenge.
These issues are increasing the cost of low-carbon generation, and often preventing otherwise perfectly viable schemes from being developed. The distribution network operators (DNOs) are heavily legislated, partly through EU state aid rules, and as a result are severely restricted in their ability to invest in the network. Leaving the EU now presents an opportunity for these restrictions to be relaxed, allowing the flexibility in investment the grid so desperately needs.
Fulfil the potential of heat
The current EU energy targets have not encouraged wide deployment of renewable heat technologies in the UK, despite schemes such as the Renewable Heat Incentive being in place and the clear benefits that having a wider variety of renewable energy sources would bring. We’ve missed a trick. But the UK now has a significant opportunity to reduce heat-related carbon emissions with district heating networks, which use wasted heat from industrial processes. The Heat Networks Delivery Unit estimates that 14 per cent of UK heat demand could be met by district heating networks by 2030, and 43 per cent by 2050. This would contribute £2 billion in capital investment and up to £6.4 billion in maintenance contracts to the UK economy.
Using this waste heat also presents an opportunity to supply some of the estimated 10.6 per cent of English households living in fuel poverty. Given the energy intensity required to generate heat, decarbonising and using wasted heat has substantial potential to reduce UK emissions and make a significant contribution towards our targets driven by the 2008 Climate Change Act.
The government also needs to incentivise local authorities to implement urban energy strategies, including building new energy centres that would use waste heat. The use of waste heat from generation systems would typically improve system efficiencies by a further 10 per cent.
Stimulate inward investment
One immediate consequence of the UK’s vote to leave the EU was the fall in the value of sterling against the euro and dollar. This resulted in UK manufactured goods becoming cheaper internationally. However, it also increased the cost of imported goods. Most low-carbon technologies are currently manufactured outside the UK, typically in Europe, which has a particular dominance in this industry – four of the top ten wind turbine manufacturers in the world are European. 2017 could be the year where we start to shift this balance.
Given the level of renewable resource and technical expertise available in the UK, the increased cost of imports could incentivise manufacturers to set up facilities in the UK instead of importing from overseas. This also creates the opportunity for UK firms to develop a route to market, as their product becomes more attractive both in the UK and abroad. With the proposed GB smart grid, the UK has the opportunity to stimulate the manufacture of smart grid equipment and use its technological strengths.
The UK energy industry could become the engine room of the economy and realise the government’s pledge to create a “Northern Powerhouse” by targeting investment in research and development, and negotiating relaxed regulations in appropriate sectors on leaving the EU. If policy can help low-carbon energy become the obvious option for industry and energy suppliers by being cost effective, secure and accessible, this market will naturally grow and encourage manufacturing in the UK.
The UK clearly needs a low-carbon strategy that reflects wider business interest and encourages a more diverse and sustainable energy mix suited to the UK’s unique requirements for years to come. Although EU low-carbon programmes have been reasonably successful to date, particularly in the power sector, policy now needs to encourage home-grown evolution in the UK energy sector.
We have a clear opportunity to shape our own agenda going forwards. We look to the next budget for policy announcements that set a clear course for the UK energy sector post-Brexit, with collaboration between government, the industry and the business community creating a brighter future for our low-carbon industry and the wider UK economy as a whole.
Chris Evans, deputy managing director, engineering consultancy Rolton Group