Big and dumb or small and smart? UK energy and climate policy at a crossroads once more

Energy efficiency is of central importance in meeting a raft of the UK’s infrastructure demands, as well as its climate targets. Ambitious energy efficiency implementation minimises the cost and maximises the benefits of decarbonisation. It addresses fuel poverty, enhances productivity and competitiveness, creates and supports quality jobs, improves energy security and boosts GDP, and can render potential ‘white elephant’ investments on the supply side unnecessary.

Energy efficiency’s track record speaks for itself. In homes, gas and electricity demand has fallen by 21% and 13% respectively since the peak of 2004. This despite there being over two million more households, higher indoor temperatures, and more lamps and appliances in each home. Thanks to insulation, efficient boilers and appliances, energy bills were £500 lower in 2017 than they would have been without energy efficiency improvements since 2004. With residential energy efficiency policy having slowed to a crawl in 2015, and the rate of insulation down 95% compared to 2012, there is now a real risk that these trends reverse. This risk must be overcome, and energy efficiency’s enormous remaining potential – which could slash household energy demand by 50% – realised.

Given energy efficiency’s central importance, the Government’s ambition for home energy renovation in its Clean Growth Strategy – for all homes to achieve an Energy Performance Certificate rating of C (on the A to G scale) by 2035 – is a good start. However, policy and investment to achieve it is severely lacking. The annual investment needed from public and private sources to 2035 is £5.2 billion. Public investment in 2017/18 was £0.7 billion. This draws in little to no private investment and there are no plans to change this amount or the way in which it is invested, leaving an annual gap of £4.5 billion.

Thought and practice on how to effectively drive greater demand for energy efficient renovation – including by harnessing the £27.6 billion market for housing repair and maintenance – is well established and needs to be acted on in the UK. In a new report out today, case studies of peer countries France, Germany and the Netherlands – and a case study of Scotland owing to its own advanced approach – demonstrate combinations of policies and public investment that are far more effective at raising renovation rates and unlocking more private investment.

Considering the UK has substantial energy efficiency policy capability and experience spanning decades, these case studies inspire the belief that the UK must be capable of doing better. But it will require a greater commitment of public capital investment and better-organised delivery to achieve.

Now is an important time to capitalise on momentum for greater ambition. Some incremental policy steps are being taken by Government following the Clean Growth Strategy’s publication last October. In March, the retail finance sector, through the Green Finance Taskforce, made strong recommendations to Government that would enable it to mainstream the financing of home energy improvements.

Crucially, the National Infrastructure Commission, having established energy efficiency as one of its priorities, has a unique opportunity to make big picture recommendations for greater energy efficiency investment as part of its first five-yearly National Infrastructure Assessment to be published on July 10th, 2018.

It must inspire Government to follow up with a more coherent and ambitious approach that treats energy efficiency as a national infrastructure priority and weaves in those steps the Government is already taking, including in response to the Green Finance Taskforce’s work. This encompasses:

1. Confirming energy efficiency as a national infrastructure priority, with clear governance arrangements, targets, a long-term action plan and funding, as in Scotland;
2. Additional public capital investment of £1 billion per year to 2035 – much of it supporting low income households – that can help unlock £3.5 billion of private investment, closing the £4.5 billion gap;
3. Adequate incentives for ‘able to pay’ homeowners and landlords, such as lower Stamp Duty for more energy efficient homes and 0% interest loans;
4. Robust regulation, strengthening over time towards an EPC rating of C, that requires some homeowners to take action and inspires others to plan and invest for the future;
5. A long-term approach to delivery in which local authorities play a core role in tackling fuel poverty, creating demand and growing local supply chains;
6. Strong advice provision and quality assurance and safety standards.

What is the prize, aside from meeting our climate targets in the most cost-effective way, of doing so? Everyone gets to live in a safer, more comfortable home that is cheaper to run: quintessentially ‘no regrets’.

Pedro Guertler is a Senior Policy Adviser at E3G, an independent climate change think tank. You can read the full report here.

The views expressed in the article are those of the author, not necessarily those of Bright Blue.

End of the line? Phasing out diesel-only trains

Last week, the Government announced its the ambition to remove diesel-only trains from the tracks by 2040. With public concern about air pollution and transport’s contribution to climate change continuing to rise, we consider the different options for phasing out diesel trains and some of the benefits.

Cleaning the tracks

Diesel trains contribute to both air pollution and climate change, with 29% of trains in service on the UK’s rail network currently running on diesel. Overall, the transport sector has largely failed to reduce its greenhouse gas emissions as part of efforts to tackle climate change. In rail specifically, greenhouse gas emissions have risen by 30% since 1990 in absolute terms. Similarly, significant levels of harmful air pollution have been recorded both on-board, and in the vicinity of, diesel-only trains. In fact, when in 2015 London Paddington station was in breach of healthy pollution limits, the air quality inside the station was found to be significantly worse than outside.

In this context, the Rail Minister Jo Johnson MP’s speech this week challenged the rail industry to publish a long-term strategy - aimed at facilitating substantial pollution and emission reduction - by the autumn of 2018. Government policy has for a long time aimed at the full electrification of the rail network, whereby conventional engine-based propulsion is replaced by electric – both overhead and third-rail – traction systems. However, such plans have had a troublesome journey.

Electric dreams

In 2009 the then Labour Government announced the first large-scale electrification plans, including schemes on both the North West and the Great Western main line. The Coalition Government continued these proposals, modifying them to include the Midland main line and other schemes.

However, in June 2015 the Secretary of State for Transport paused the Trans-Pennine and Midland main line electrification schemes. Both were subsequently resumed in September 2015 with delayed completion dates. It was argued that the focus should be on delivering the Great Western upgrade on time and on budget.

In November 2016, delays to works on four areas of the Great Western line were announced. Subsequently, in July 2017, some electrification works were cancelled altogether between Cardiff and Swansea, between Kettering, Nottingham and Sheffield, and between Windermere and Oxenholme. It was argued that greater capacity and environmental benefits could be achieved without the substantial cost and disruption associated with full electrification works by deploying new bi-modal trains. Bi-modal trains are hybrids capable of running on both electricity where overhead cables are available and diesel where they are not.

A change of track?

Although approximately 34% of Britain’s rail network was electrified in 2015-16, experts are sceptical about the potential for full electrification. Electrification coverage has increased over 2017 and into 2018, yet has clearly suffered major set-backs, primarily due to rising costs.

The Rail Minister’s speech last week reaffirmed this change in policy direction away from complete electrification, promoting the use of bi-modal models and the potential of hydrogen-fuelled trains. Train manufacturer Alstom has recently tested hydrogen trains in Germany, whose only waste product is steam. The attention on this new train technology supports the growing interest in hydrogen as a low-carbon fuel. Existing research suggests that by repurposing the gas network to use hydrogen the UK is well-placed to become a global leader in this area, with the Government announcing new investment in hydrogen infrastructure.

As highlighted in the recent industrial strategy white paper, the Government also supports the long-term goal of developing the battery storage industry in the UK, given its importance to the future energy system. Battery-powered, electric-traction ‘hybrid’ trains could support this economic ambition, with the Northern franchise expected to deliver such trains on the Windermere branch from 2021.

Counting the cost

Underpinning debates about these delays have been conflicting claims about the costs and benefits of electrification. The National Audit Office (NAO) has been highly critical of several aspects of electrification, particularly the optimistic cost and productivity savings. For example, the initial £1.7 billion cost of electrifying the London to Cardiff line was revised up to £2.8 billion in the Hendy review. Initial estimates of the economic benefits - such as £100 million a year for the South West region through reduced journey times and added seating – have subsequently been viewed sceptically.

By contrast, delays to track upgrades also carry costs. Both the NAO and House of Commons’ Transport Select Committee have pointed to the additional costs for rail companies - and subsequently the customer – from investment uncertainty, continuing to run inefficient diesel trains, and the necessity of switching to interim, bi-modal, solutions.  

Alongside cost, the benefits of reducing diesel usage to public health and the environment are substantial. Fully electric trains produce virtually no toxic air pollution at the point of use and provide a 20-60% reduction in total associated CO2 emissions relative to old diesel-only models, a figure falling constantly as electricity decarbonises.

By contrast, bi-modal train models are estimated to lower particulate matter pollution by 90% and nitrogen dioxide emissions by 50-59%.  Relative to old diesel-only trains, new bi-modal models would reduce total associated CO2 by approximately 12-30% by cutting diesel usage by 40-50% and improving engine efficiency.

Conclusion

With air pollution and climate change both significant issues of concern to the public, this week’s ministerial announcement, even if less ambitious than the previous policy of full electrification, should be welcomed.

Philip Box is a researcher at Bright Blue

Diamond in the rough: why Scotland has a key role to play in the UK's clean growth

Carbon capture and storage (CCS) has a troubled history with the Conservative Party. Two failed competitions, two National Audit Office inquiries, and millions of pounds spent without a single operational large-scale project to show for it is hardly an endearing track record for any new Minister to inherit. But with the publication of the Clean Growth Strategy, Ministers across government have signalled renewed, albeit cautious, enthusiasm for CCS as part of new plans to decarbonise and grow the UK economy.

“It is very much a personal commitment and something I strongly believe is exceptionally important”, Claire Perry MP, Minister for Climate Change and Industry, told a Westminster Hall debate back in October 2017. “We want the prize of global leadership in this area: we want to be the people who break the deadlock, deploy CCS in the UK and capture the export opportunities”. Strong statements, considering the rocky history.

Newfound enthusiasm for CCS in the Conservative Party however doesn’t come without its caveats. “Costs must come down” has been the go-to line for Energy Ministers since the ill-fated CCS commercialisation programme was brought to an abrupt conclusion in November 2015. But as Offshore Wind Week has so aptly demonstrated, cost reduction for low-carbon technologies is as much within the gift of governments as it is of the private sector and research communities.

Consider how relative policy certainty and clear commitments to offshore wind, for example, have made the UK a global leader in the field; and then contrast that to the indecision and sporadic flip-flopping that has characterised political appetite for CCS in the UK. That’s the scale of the challenge facing Claire Perry, and overcoming it will require much more than £100 million worth of research and development and a CCUS (carbon capture, utilisation and storage) pilot.

The UK isn’t the only country grappling with the ‘how to do CCS’ question though. At the vanguard of international efforts on CCS is the International Energy Agency (IEA), who recently hosted a high-level roundtable with Ministers and CEOs from some of the world’s largest energy companies. The IEA’s Executive Director, Fatih Birol, described it as the “highest level of industry and government engagement that we have seen on CCUS”. (Unfortunately, the UK chose not to send a Minister.)

New IEA analysis published that day shows that global capital investment in large-scale CCUS projects has now surpassed $10 billion. A huge amount of money no doubt; but not when compared against investments in other low-carbon technologies, which came close to $850 billion during the last year alone.

“Without CCS, the challenge [of meeting global climate goals] will be infinitely greater”, said a joint statement from Birol and US Energy Secretary, Rick Perry, adding, “we know this is essentially a policy question”. Part of the problem with CCS policy (and politics) though is that perceptions of costs continue to dominate the discourse, often before any discussion around the benefits has even begun.

Robust policy development requires a proper understanding of the costs and benefits of different investments and different technological pathways. In the UK to date though, CCS policy has been based predominantly around cost and risk management. In its review of the second CCS Competition, the National Audit Office found that the responsible department (the Department for Energy and Climate Change, at the time) hadn’t even fully assessed the benefits of the programme.

That’s why a new study from Summit Power, a US project developer with a portfolio including both traditional and alternative forms of electricity generation, has started to turn heads.

In the aftermath of the November 2015 cancellation of the CCS commercialisation programme, Summit quietly began developing options for a new gas CCS project at the Grangemouth industrial site in Scotland. With an anchor power project helping to de-risk investments in CO2 transport and storage infrastructure, industrial emitters in the region would be able to access an affordable solution for reducing their CO2 emissions.

Working with a range of academics, consultants and other CCS organisations (including the Teesside Massive, sorry, Collective), Summit has turned the typical CCS cost debate on its head. Instead of focussing only on what CCS might cost, its first-of-a-kind analysis has also shown the economic benefits that it might bring.

Based on Committee on Climate Change (CCC) analysis and guidance from the HM Treasury Green Book, Summit found that CCS could deliver £169 billion in benefits to the UK economy between now and 2060, compared to total costs of £34 billion.

A significant portion of the benefits identified derive from avoiding CO2 emissions, but by working with the University of Strathclyde to assess ‘linked economies’, the analysis found that the project could deliver £5 billion worth of health/wellbeing benefits and a colossal £54 billion increase in domestic economic activity. Between now and 2060, the analysis estimated that more than 225,000 jobs could be created or retained as a result of investing in CCS.  

Aside from costs, the other main hurdle that CCS has struggled to overcome in the UK is the scale of commitment required. Summit’s approach, again, tackles this challenge head-on and illustrates how a UK CCS programme could be structured so that each individual phase would make sense in its own right.

Far from requiring government to commit to an endless roll-out of projects in order to justify initial investments in infrastructure, Summit’s analysis shows that a decision to invest in just two initial phases of CCS between now and 2025 could provide £8.1 billion in economic benefits to the UK in return for a total investment of £3.8 billion. What’s more, that initial investment then provides optionality for the future: invest further if more CCS is needed; don’t bother if it’s not. Nothing lost.

The coming weeks will see the first meeting of the new CCS Cost Challenge Task Force and the Ministerial CCUS Council. It’s not yet clear what impact Summit’s analysis will have on the direction of future CCS policy, but one would at least hope that it helps shift a conversation dominated by costs to one that also recognises the substantial benefit that CCS could bring to the UK. As David Cameron once said:

"This isn't a distant dream. CCS is truly within our grasp. And we in Britain have got what it takes to make that a reality. We've got an army of experts who have worked for decades in the energy sector. We've got a manufacturing and energy industry that wants to invest and get things going. What's more, we've got the depleted oil and gas fields in the North Sea in which to store the carbon.”

Theo Mitchell is Director of Enerfair Engagement, a policy and communications consultancy dedicated to industrial decarbonisation and the energy transition. Previously, he was Head of Office and Energy Policy advisor to Lord Ian Duncan in the European Parliament and Policy Manager at the Carbon Capture and Storage Association

The views expressed in the article are those of the author, not necessarily those of Bright Blue

Global challenge, local leadership: a Scottish perspective

Scotland is widely considered of one of the global leaders on tackling climate change and enhancing our environment. We have some of the most ambitious targets in the world and this is to be welcomed. However, it is time that Scotland set aside the notion that missed targets and slipping deadlines are something simply to be accepted. For example, despite having some of the most stretching recycling targets in the world, Scotland has a worse recycling rate than England and lags even further behind Wales. Scotland is facing a biodiversity crisis with Scotland’s rating on the Biodiversity Intactness Index in the bottom fifth of all countries.

The Scottish Conservatives recently set out our commitment to deliver a more sustainable Scotland in a new environment and climate change policy position paper. We believe in protecting and enhancing our natural heritage. We believe it is our duty to the next generation to leave Scotland a better place than we found it. A Scotland that builds and heats more homes without destroying green space or polluting our planet. A Scotland where we work with our farmers and communities to restore our landscape. A Scotland where every person and every place can see the benefits of cherishing our vast natural capital.

At a time when the global economic demand and environmental systems are under intensive and competing strain, a new approach is required, we can no longer consume our natural resources at the current unsustainable rate, and we can no longer think of economic development as a competing force against environmental protection.

The Scottish Conservative approach to the environment and climate change is founded on three key tenets. The first is a belief that climate change is a critically important issue, and one for which we must show leadership on the world stage in order to achieve results. The second is that, in the long term, resource prices will increase and access to these resources will become less reliable. By decreasing our reliance on products which are manufactured abroad we can reduce global emissions but also grow the economy here in Scotland. The third tenet is that we need to look holistically at our management of the environment. That means making the business case but also recognising that for certain projects the business case will not be viable if assessed via conventional accounting. Therefore, we recognise a role for natural capital in order to progress key projects. We will prioritise achieving behaviour change, technological advancement, big data and innovation in order to tackle climate change, boost biodiversity, grow the economy and ensure new ideas are delivered for the benefit of Scotland.

We have put the circular economy at the heart of everything we do. The circular economy is an economic system where resources are used for as long as possible at their highest utility value in order to extract the maximum benefit from them. For Scotland, this would create more, higher skilled jobs, close the productivity gap as well as help to reduce income inequality. For Scottish businesses, the implementation of circular economy business models will improve their ability to control supply chains and manage long-term costs, turning inputs into assets.  For consumers, this will provide opportunities and flexibility to reduce and manage the costs of products and services. For the environment, it can minimise negative externalities and help play a part in minimising our carbon footprint. The bottom line is that a circular economy will be a win for businesses, a win for consumers and a win for the environment.

To successfully transition to a circular economy, we need to refocus current government intervention. Government leadership on technological advancement, education and behaviour change, and the creation of a Centre for Circular Economy Excellence will together help to achieve an estimated, according to the Ellen MacArthur Foundation, £3 billion economic boost. A Design Academy will stimulate innovation and become a catalyst for embedding circular economic practices and thinking into the design sector. This will cover system, product and business model design. We will support the design of new technologies that enable innovative asset tracking, data management, reverse logistic solutions and connectivity. New business models will be encouraged around renting, leasing, servitisation, remanufacturing and reuse. We will take a cohesive approach to delivering all business support functions provided by government.

A Circular Economy Education and Skills Academy will encapsulate a schools’ programme which will engage with pupils across a diverse range of disciplines to highlight the opportunities a circular economy presents. In the tertiary sector, the Academy will link diverse research topics to speed up the pollination of innovative work. Development of key skills such as engineering, repair, remanufacturing and circular economy accounting will also be important in realising our circular economy plans.

We must also do more to support biodiversity given that Scotland is blessed with a rich and diverse range of flora and fauna. We will take a three-step approach – understand, safeguard and enhance. Information is the key to protecting our natural heritage, and that is why we will tackle the existing gaps in knowledge by establishing a Biodiversity Baseline. Crucial to that process will be working alongside key stakeholders to involve them as full partners and leverage their expertise.

We take a broad view of safeguarding our biodiversity across Scotland, from the great glens to suburban Scotland. Our approach will introduce new agricultural methods to support the environment, halt the spread of invasive species and effectively manage deer. We want to go further than conservation and see our biodiversity enriched. Our towns and cities will be improved by the creation of new greenspaces, and our countryside will see the increased restoration of natural habitats.

Our approach will provide Scots with a greener and more pleasant land to call home. We set ourselves this task because it is one of the greatest challenges of our times. It is for this generation to rise to the occasion and ensure that the next will live in a better, more productive and more sustainable world. It is time for local leadership to meet this global challenge.

Maurice Golden MSP is the Shadow Cabinet Secretary for the Environment, Climate Change and Land Reform (ECCLR), Deputy Convenor of the ECCLR Committee and Scottish Conservative Deputy Chief Whip. Prior to being elected, he led the Circular Economy programme for Zero Waste Scotland. He is a Chartered Waste Manager and Fellow of the Royal Society for the encouragement of Arts, Manufactures and Commerce. His recent portfolio paper sets the Scottish Conservative vision to provide local leadership for our global challenge

The views expressed in this article are those of the author, not necessarily those of Bright Blue