There is now just over a decade to go until the government’s target of decarbonising the UK’s power system, with much work still to do. In this article Baringa’s Mike Wilks argues that achieving this ambitious goal requires genuine collaboration, an acknowledgment that trade-offs will be required and a reassessment of the need for precision over pace.
It is worth reflecting that we are now only 11 years from 2035, by which point we need to have delivered the largest energy sector transformation and associated energy network infrastructure build in living memory. There is a clear prize of getting this right – not least in a world where other countries have the same bold ambition e.g. being able to attract and retain the huge scale investment we need to the UK, not to mention the assets and people needed to physically deliver it. And the “cost of getting it wrong” and missing net zero will be high both financially and in terms of climate impact. We know there has already been some incredible progress. If we compare today with the 2010s there has been a remarkable decarbonisation of our UK energy system, to the point where already on some days a majority part of energy production is carbon free.
To continue this journey at pace to achieve the UK’s 2035 net zero ambition, means re-balancing the priority of pace over precision. Seeking high precision and being late is more costly than moving quickly with rough estimation. A fixation on costs today needs to be replaced by a long-term mindset on costs, energy system resilience, and climate impact tomorrow. Affordability, security and reliability are red lines that cannot be crossed, and policy makers, regulators and the industry need now more than ever to balance future with present, and articulate to consumers the benefits of balancing a low carbon future with the path to get there.
We need more than words and discussion. We need action and collaboration, and everyone has a role to play. Industry solutions such the ENA’s Digital Connection Platform and ongoing Network Innovation projects are showing the way. The widespread and increasingly integrated adoption of IT and digital technologies such as the emerging Digital Spine are essential to effectively enable this transition. This needs to be a key focus going forwards and requires a blend of organisations and people – existing and new – to successfully make it happen.
And it is not all about electricity, as some might suggest. Gas has a key role to play in secure energy transition and in an enduring net zero whole energy system. Anyone looking at the UK’s smart metering rollout duration and current level of completion understands the practical delivery challenges of decarbonising domestic users, not to mention transport and industry. So both methane and increasingly hydrogen have a key part to play in a cost effective, secure net zero UK energy system. And that mean RIIOGT3 and RIIOGD3 processes and outcomes need to be mindful of that.
To reach net zero by 2035, we need early and bold changes to policy, regulation, markets, and industry practices. Not everyone is going to be happy– but if you want to make an omelette you need to be prepared to break some eggs. This means accepting trade-offs and focusing on the end goal with a UK plc mindset. We also need:
More Collaboration, Less Rivalry: between companies, between companies and Ofgem and between electricity and gas. There’s plenty of opportunity here for everyone and prioritising solutions that are optimised for the benefit of UK energy consumers not individual parties is key. We welcome emerging examples of this, under GB grid connection reform, ASTI delivery, and Network Innovation and ENA projects. Further policy and regulatory initiatives under RIIO3 should aim to help to foster greater collaboration between energy networks.
More Coordination, Less Market Free for All: Government and NESO have key roles to play. The development of the SSEP and RSPs, are good examples, but we need similar approaches for REMA and UK supply chain. Ofgem should also align with this and balance the net zero ambition and urgency, with its natural instinct to maximally promote competition. The deployment of digital approaches are vital for effective coordination and it is gret to see Ofgem driving network companies to do that.
More Courage, Less Caution: We face unprecedented challenges and tight deadlines. We need bold decisions from DESNZ on REMA and UK supply chain policy interventions. In 2024 Baringa undertook a comprehensive review of the supply chain for DESNZ. The results of this are due for publication in the Spring of 2024. We first supported the ESO and then DESNZ on assessment of REMA options over a year ago and the industry still awaits key decisions. Ofgem should also give companies more flexibility and freedom to deliver the required scale of investment at pace within the RIIO framework, whilst of course duly mindful of protecting consumers from unduly high costs. Conservatism will slow us down.
We all share the risk, the reward, and the work to deliver net zero, but it isn’t enough just to be doing the right thing. We all need to be better at communicating what we are doing, why and how we are making progress. It is super important we keep consumers, investors, and the supply chain on board.
The time for discussion and debate is over, now is the moment for deciding and doing. Then the UK’s 2035 net zero ambition can become Mission Possible.