This article was originally published on 28 January 2020 in Energy:2030 Issue 25.
Welcome to the last Energy:2030 in its current format. From March, this publication will be called Energy: Net Zero and will be renewed with a dedicated and fresh focus on the challenge of transitioning our energy sector to one with net zero emissions.
Definitions
Net zero, simply put, is achieving an overall balance between emissions produced and emissions taken out of the atmosphere. The term can relate to just CO2 emissions (a net zero carbon target), but national targets tend to relate to all greenhouse gas emissions. The UK government passed a law in June 2019 that will require the country to bring all greenhouse gas emissions to net zero by 2050. The Scottish government followed this up in September 2019, introducing a Climate Change Bill that commits Scotland to a target of net zero emissions of all greenhouse gases by 2045.
Aside from tackling emissions from the energy and transport industry, a key component of the net zero drive is applying changes to land use and forestry practices. But our focus will be on the energy sector, and in this regard the term can be interpreted differently when applied in different contexts.
The World Green Building Council’s definition of a net zero carbon building is one that is “highly energy efficient and powered from on-site and/or off-site renewable energy sources, with any remaining carbon balance offset.”
The Science Based Targets initiative, in its September 2019 report Towards a Science-Based Approach to Climate Neutrality in the Corporate Sector, gave meaning to the definition in a non-domestic sense. The paper describes net zero for a company as “achieving a state in which the activities within the value chain of a company result in no net impact on the climate from greenhouse gas emissions.” It is also a case of balancing the impact of any remaining greenhouse gas emissions with an appropriate amount of carbon removal techniques.
Transition
When Energy:2030 first issued in January 2018, the idea of having a net zero economy was not in the public or political consciousness. The focus of the publication was the smart, flexible future that sits at the heart of government and regulatory policies. We looked at new approaches to market and regulatory design, the interaction between the two and how they are being driven by policy change. We presented evidence of how these interplay and strategies which were being applied in other jurisdictions. We intend to expand our horizons of this international coverage, looking at more markets in Europe as well as our usual coverage of US, Australia and New Zealand.
In the earlier issues of the publication we laid the groundwork for what now can be interpreted as net zero apparatus. This includes articles on the basics of smart grids, circular energy economies and the DNO-DSO transition. We also considered how consumers might maximise benefits from new opportunities arising from battery storage, peer-to-peer trading and other demand-side/supply arrangements. These smarter and digital markets have birthed the concept of the prosumer and the connected home.
Additionally, we started to report and offer insights into developments in the decarbonisation of heat and transport – the lingering and complex conundrums in the net zero equation that have the largest margins for decarbonisation.
In Energy: Net Zero, we are going to carry this coverage forward. In the evolved format, Heat and Transport will have their own separate slots and our coverage of electricity networks, renewables technologies and demand/supply arrangements will be bundled into a new section – Power. Completing this new format will be a section on Industry.
Figure 1 shows these section headings in a simplified framework with a selection of other energy market components and energy flows that will be prominent in a net zero system.
Industry
With the inexorable march towards subsidy-free renewables in power in many markets, the role of private businesses and industry in driving net zero is going to expand. There are going to be opportunities and propositions to finance this transition too, with corporate power purchase agreements an early and increasingly important model.
We have also started to see lenders factor net zero into their investment decisions. The Royal Bank of Scotland, for example, recently revealed its climate-related financial disclosures in its Annual Results on 14 February. It plans to stop lending and underwriting to companies that do not have credible transition plans in line with the 2015 Paris Agreement in place by end of 2021. Finance adviser to the Prime Minister for COP26 Mark Carney has said this week that private finance will be “critical” to creating a net zero economy. Furthermore, the Bank of England said in a statement this week that “to achieve net zero, every bank, insurer and investor will need to adjust their business models”.
Industry is going to be instrumental in advancing emerging markets such as hydrogen applications and carbon capture, utilisation and storage (CCUS). The CCUS market in the UK has had false dawns in the past (see Energy:2030 issue 19) and there remain several drawbacks and challenges to deploying CCUS applications at scale (see page 7). These kinds of instances highlight the importance of knowing potential pitfalls and missteps in the energy transition. We will endeavour to identify and analyse these in Energy: Net Zero.
Industry, as well as domestic households, will also be concerned with improving energy efficiency in the form of improving building standards. The UK Green Building Council (UKGBC) launched a catalogue of net zero case studies on 14 February. These projects demonstrate innovative approaches that can provide organisations with practical examples of the methods needed to encourage and deliver a net zero carbon-built environment, across a wide variety of building types. We will aim to investigate these approaches in detail in future issues.
Policy
There is still onus on governments, regulators and local authorities to steer net zero and provide the right environment for markets and models to flourish through radical policy change.
As we remarked in Energy:2030 issue 25, Finland, Denmark and Sweden are among the best performers when it comes to achieving carbon neutrality. Each have lofty ambitions that are translated into targets and supported by effective policy frameworks.
Some immediate priorities in the UK are providing support for onshore renewables. We agree with the recommendation in the Science and Technology Committee in its 22 August 2019 Report on Clean Growth that repowering existing wind projects will be important in reaching net zero by 2050. This kind of initiative can be established in national planning policy.
We also agree with the Committee on Climate Change Chairman Lord Deben’s 8 August 2019 recommendation that “carbon pricing is essential” but needs to be used as part of a suite of policy instruments. A strong and rising carbon price can induce changes to both short-term behaviour and longer-term investment decisions.
We expect nuclear electricity to play a role in a net zero future and we will cover the industry’s developments in Energy Spectrum. There may, in future, be scope to cover developments in small modular reactors and fusion technology.
A final word
So, we will aim to report on and signpost what we consider to be the most important, successful and innovative methods and strategies in delivering net zero.
We hope this evolution is aligned to your interests and please do offer your feedback or suggestions by contacting me at n.mearns@cornwall-insight.com.
If you have enjoyed reading this article and want to read about the latest developments in energy markets around the world, please contact the Editor, Neil Mearns, for a free month’s trial.
Energy: Net Zero (formally Energy:2030) is a monthly publication covering relevant and interesting developments including:
- market mechanisms and regulatory incentives
- technological developments and their anticipated impact
- changing policy as it evolves both in the UK and worldwide
