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UK decarbonisation plan will need private capital

Out-Law News | 04 Feb 2020 | 12:31 pm | 3 min. read

Regulation that encourages investment in "new clean technologies" is needed to underpin plans to decarbonise the UK's energy supply, an energy expert has said.

Ian McCarlie of Pinsent Masons, the law firm behind Out-Law, was commenting after the UK's energy regulator Ofgem set out a new decarbonisation plan aimed at supporting aims to reduce emissions to net zero by 2050.

"These are ambitious plans which if implemented and delivered will be transformative for the UK energy sector and wider economy," McCarlie said. "Private capital will need to be deployed at significant scale to build out new networks, generation plant and infrastructure so it is absolutely fundamental that government sets clear policy objectives and designs a regulatory framework that will encourage deployment of capital into new clean technologies where innovation and smart delivery is key in the step change to a net zero future."

Ofgem's plan sets out nine ways (38 page / 2.3MB PDF) in which the regulator plans to decarbonise the UK’s energy supplies. It was published on the same day that the UK government confirmed plans to bring forward its plans to end to the sale of new petrol and diesel cars and vans from 2035 at the latest. The new target is subject to consultation and will include the sale of hybrid vehicles. If confirmed it will represent an acceleration of existing plans to apply the ban from 2040.

Peter Feehan of Pinsent Masons said: "Given the announcement that the government intends to bring forward the ban on petrol, diesel and electric hybrid cars by five years to 2035, there’s a clear need to de-carbonise the supply chain and really begin to think how and when we use electricity, so this is a good forward step. Smart and flexible grids are going to be a key component of meeting this challenge; already we see our car manufacturer clients seeking to understand the opportunity this presents in the localised grid stabilisation and supply."

Ofgem said it would regulate to ensure network companies invest to deliver affordable, clean energy, and would become more adaptive in its approach to regulation. It announced that it would set up a fund to “unlock investment in innovative solutions to tackle climate change”.

The regulator will explore options to support the development of an offshore grid to enable a four-fold increase in offshore wind generation by 2030.

It said it would review the way the energy system is managed to make sure it is fit for a net-zero future, and “kick start innovation” by suppliers to create low-carbon products and services for customers.

Ofgem wants to encourage more options in the way people use electricity, such as by charging electric vehicles at night and selling the stored power back at peak times. It said it would enable more drivers to choose electric vehicles by supporting an energy network that would power 10 million of them by 2030, and will publish an electric vehicle strategy to support that aim.

Low-carbon heating options for homes could include using hydrogen boilers or electricity to power heat pumps, and may see more customers connected to heat networks. The regulator said it would use its expertise to work closely with government as it develops its strategy to decarbonise heat.

Ofgem said it recognised that there are trade-offs to overcome, such as how to fairly spread the cost of a low carbon energy system between today’s and tomorrow’s consumers.

It said the transition to a net zero environment would require the use of new technologies, better use of data, and artificial intelligence to boost flexible demand.

“The transition will also require consumers to be engaged - and to see that the costs and benefits of the transition are falling fairly. How and when energy is used must change. This opens up opportunities for a consumer-led transition, enabled by new technologies,” the regulator said.

The plan focuses on actions to be taken within the next 18 months, but Ofgem said the country was on “an urgent, but decades-long journey towards net zero”.

It added that its approach would continue to evolve and it would develop new actions and programmes as the opportunities arise.

The announcement comes just days after the Environment Bill was re-introduced to the UK parliament, with the aim being to enshrine environmental commitments in law in the wake of Brexit.