COMMENTARY- Why the UK could be the first G7 country to deliver a “good net zero”

August 23rd marks my 30th anniversary with Accenture, with 29 of those years working in Energy and Utilities, taking me to more than 30 countries, from my first oil & gas project in 1994 in offshore logistics in the UK North Sea, to creating our first Clean Energy team in 2007 – e.g., biofuels, EVs and batteries, hydrogen, and UK offshore wind-, to 2014 working on renewable gas, water management in shale gas, and LNG- then in 2017 to focus on Renewables- wind, solar, hydro power, batteries- and then in 2021 leading and integrating all aspects of our Energy Transition practice including grids, industrial clusters, hydrogen, CCUS, etc… Having worked all over the energy and utilities industry, I remain optimistic and hopeful that we can deliver a “good net zero” – inclusive, secure, protecting nature and the environment, and affordable.  

To move to a system that is at least 50% electricity and at least 50% of that electricity from variable wind and solar will require a massive infrastructure and power market transformation, in the face of increasingly frequent climate events and geopolitical challenges. We will need to take an integrated approach and act as one community. 

I want to dedicate this commentary to the UK energy and wider stakeholder community who are coming together to deliver a “good net zero” by 2050 and net zero electricity by 2035. I am part of different net zero working groups in the UK: the Electricity System Operator Technology Advisory Council (ESO TAC), The Royal United Services Institute’s National Security and Net Zero Project Advisory Board (RUSI project), the National Engineering and Net Zero Policy Centre’s Net Zero Electricity Working Group (NEPC/RAE), the Energy Institute’s Powering Net Zero Board, and the UK Industrial Clusters who are members of the World Economic Forum’s Transitioning Industrial Clusters Towards Net Zero Initiative (WEF initiative). It’s been great to see these different groups working towards the same goal from different perspectives. 

Four aspects of the UK’s net zero efforts that demonstrate a “coming together of different stakeholders, ideas, sectors” that I want to call out:

1.     Creation of the Future System Operator (FSO) and integrated planning of infrastructures

The FSO will have responsibility for the integrated planning of electricity, gas, and eventually hydrogen and carbon capture and storage (CCS) infrastructures.

‘The Future System Operator enables whole system thinking and coordinated action. There is a requirement to optimise and integrate the planning of our energy systems to ensure that we are delivering the best outcome for society and the economy. For example, how do you best integrate the large increases in offshore wind (GB has a target of 50 GW by 2030) with the emerging hydrogen technologies and the reinforcement needs of the networks. The ability to identify, evaluate and then deliver options at pace, in the context of net zero, reliability, resiliency, energy security, and cost, is critical if we are to meet our net zero electricity by 2035 and net zero energy by 2050 targets.’ –

Fintan Slye , Executive Director of the Electricity System Operator (ESO)- will become the FSO

The FSO is a place where solutions to hard challenges can be compared and combined, e.g.,

-       the 2 weeks in the UK winter when there is little wind and it’s dark, what is the optimum mix: overbuilding wind and solar and associated grid investment vs. invest in interconnections vs. invest in hydrogen or other long duration storage vs. investing in natural gas with CCS vs. investing in nuclear vs. investing in energy efficiency and demand flexibility?

-       how much can wind, solar, demand response, EVs, and digital system operations do to support response and reserve grid requirements because the more we can do with renewables and non-build options, the less we need to invest in back-up capacity (i.e., fossil w/ CCS, overbuild wind and solar, standalone batteries, etc..).

These questions can only be answered by taking an integrated approach, acknowledging the physics of this new power system, incentivising players to develop the required capabilities, and designing a power and capacity/reserve markets to match. The work that the ESO TAC, the National Engineering Policy Centre/Royal Academy of Engineering, the Energy Institute’s Powering Net Zero Board, and so many other groups are doing to support policy makers, stakeholders, and the public in understanding these engineering realities is invaluable, and I see the progress in the language and level of detail in the dialogue on power and capacity market reform, build vs. non-build options, and cross sector (e.g., with Ofcom, with the Digitalisation Taskforce) and cross technology integration challenges.

The UK Case Study in the World Economic Forum’s Electricity+ paper is a snapshot of the current UK policies across the physical infrastructures that need to be integrated to deliver a net zero integrated energy system with an electricity backbone.

Shubhi Rajnish , Vernon Everitt , Cameron Shade , Andrew Chilvers , Simon Harrison , Nick Wayth CEng FEI FIMechE , Julian Leslie , Eric Brown , Kristen Panerali

2.     Demand equal to Supply, and public and stakeholder engagement

Laura Sandys CBE , the Chair of the UK’s Energy Digitalisation Taskforce, made the case for Whole System Costing, equally valuing demand assets and activities to supply-side solutions. When the work was released in 2021, it was not an easy concept as our energy policies have historically been supply-side driven- i.e., we build and dispatch to meet demand. But the Russia-Ukraine war changed all of this. Demand had to kick-in, and the UK delivered a WW2-type of mobilization of demand resulting in 10-15% energy efficiency and increased demand flexibility.

The winter of 2022/2023 saw the launch of UK ESO’s Demand Flexibility Service (DFS), the largest demand response scheme to have taken place on Britain’s electricity network. The service ran from November 2022 to March 2023, with 20 test events and two live events. 1.6 million households and businesses participated, delivering in total 3,300MWh of electricity reduction. It proved out that aggregator models could support end consumer flexibility. But, I think, the game changer was the support that the BBC and popular media gave to the demand flexibility and energy efficiency effort. Virtually every morning on BBC, we were reminded of our demand response hours or of how to reduce our energy consumption. This brought the concept of “flexibility” and net zero into the home and with this, an increased awareness of the energy transition and what we could do as consumers. I even saw a BBC special on carbon capture and storage (CCS).

Rachel Fletcher , Kayte O'Neill , Cordi O'Hara OBE FEI

3.     UK’s Industrial Strategy underpinned by its industrial communities

Industry is also working hard to support stakeholder engagement. A few months ago, I attended SSE’s update on its just transition strategy that SSE launched at COP26 (post). I called out the diversity in the stakeholders who participated in the panel – e.g., trade unions, climate NGOs. The UK’s CCS and Hydrogen approach is underpinned by an industrial strategy that focuses on the industrial heartlands of the UK and the government’s “levelling up” agenda.  These “Super Places” –will exploit geological and geographical advantages to implement low-carbon technologies such as CCS and hydrogen. Just six of these industrial clusters emit over 36 MT of CO2 and provide £320BN in annual exports and 1.5 million jobs and are well suited to CCS and hydrogen development.  Aligning diverse stakeholders on the industrial strategy of focusing on the economic prosperity of industrial regions, with low-carbon technology playing an important role in attracting industry, creating high skill jobs, and the potential for export of premium low-carbon products, will accelerate the transition.

The local communities of the two Track-1 clusters, Hynet and Zero Carbon Humber (part of the East Coast Cluster) have impressive outreach activities. From the survey that Hanson Cement did that showed strong local support for its industrial carbon capture project (see Hynet post) to Humber’s Waterline Summit. Hynet and Zero Carbon Humber were signatories of the WEF industrial clusters initiative which is technology and industry neutral, spanning efficiency and circularity, electrification, hydrogen, and CCUS.  Oonagh O Grady , previously responsible for SSE’s Zero Carbon Humber investments and now responsible for SSE’s green hydrogen activities, has previously talked about how, for ZCH, CCS unlocks blue hydrogen, which unlocks green hydrogen, which can then unlock shared assets for renewables and electrification. The Climate Change Committee (CCC) 2023 Progress Report to Parliament flagged areas of improvement in industrial electrification and waste. Industrial clusters, -given the large focus of sharing on infrastructure, the integration and optimization of processes and strong stakeholder support-, are where industrial electrification and waste can also be addressed. There are already waste projects in Hynet as part of the first industrial carbon capture projects. 

Alex Milward , Bryony Livesey, Will Lochhead , Luciano Vasques , Chris Manson-Whitton , Joanna Kolomanska , Sean Bushart , Jörgen Sandström , Alistair Phillips-Davies

4.     Wide engagement on risks and making hard/controversial National/Energy Security and Net Zero choices

As we have seen with the climate events and the Russia-Ukraine war, the road to net zero will be a bumpy one, and there will be moments (e.g., unforeseen climate or geopolitical events) where we will need the O&G industry to help manage energy price volatility, often through increasing supply. Additionally, most understand that the massive expansion offshore wind and the grid will require significant steel and cement, and that the build out of wind, solar, and batteries globally is also increasing by an order of magnitute the demand for critical minerals. Establishing secure, ESG compliant, and efficient supply chains (and increasing the dependence on China for critical mineral processing, batteries, and solar panels), next to permitting, is one of the biggest challenges to delivering the net zero capacity needed.  Balancing short-term risks with the desired medium and longer-term net zero outcome is a big challenge that the UK government and initiatives like RUSI’s National Security and Net Zero Project are visibly trying to tackle..

For example, the UK’s blast furnace steel industry and the approval granted for a new coking coal plant in the UK to supply this steel is controversial, given the need to move to electric arc furnaces and to set up scrap steel and high grade iron ore supply, and received a lot of criticism by the climate community. However, given the massive domestic demand for steel for offshore wind farms and our grids, not having domestic steel making in the UK is not really an option building new plants and supply chains will take time. As per @Dan Mark’s RUSI paper on steel, “The UK would become the biggest economy by far worldwide to have no significant domestic steelmaking capacity.”

Additionally, we have to manage the future risk that comes with our new system at the same time as managing the traditional energy security risk with our current system, i.e. natural gas and oil spiking during geopolitical or climate events. The Energy chapter of the UK Budget Office’s Fiscal risks and sustainability report flagged that the UK’s is still one of the most gas- dependent European economies and highlighted the sustained negative impact on the economy of the gas spikes that we saw with the Russia-Ukraine war- “continued dependence on gas could be as expensive fiscally as completing the transition to net zero, were periodic upward spikes to global gas prices continue to occur” (page 98). 

Although, there is no question that the UK wants to reduce fossil demand and increase renewables and nuclear capacity, the UK’s government made the controversial decision to grant licenses for North Sea oil and gas production, and this decision has been widely criticized by the climate community. The case made is that this will reduce import dependency in the short-term (and domestic gas production has about one-quarter of the carbon footprint of imported liquified natural gas) and will not change the managed decline of the North Sea.

To be clear, I don’t know if these were the right decisions, but I understand – particularly with the climate events and the Russia-Ukraine war- why short-term pragmatism and risk management won out. These are not easy decisions, but they won’t prevent the UK from reaching its 2035 net zero electricity and 2050 net zero energy targets as long as progress in renewables, nuclear, grid expansion, power market reform, industrial clusters, and electrification of transport, heating and industry continues. The Department of Energy Security and Net Zero- brings a lot of the trade-off decisions to one place where they can be debated openly, e.g., the current consultation on the UK the Strategy and Energy Policy.

Luca Corradi , Al-Karim Govindji , James Henderson , Paul Spence

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I know there are MANY issues and challenges, but, similar to the post on the 2012 offshore wind report, I want to mark my 30th Accenture anniversary with a glass half-full post- focusing on the increase in the CCC’s confidence in meeting the Fourth Carbon Budget (2023-2027) and my belief that the four aspects of the UK’s increasingly integrated net zero efforts, that bring together different stakeholders and competing points of view to work through trade-offs and find compromise solutions, will close the gap that the CCC has highlighted in in the UK meeting its 2030 NDC and the Sixth Carbon Budget (2033-2037).

Toby Siddall , Helen Barrow , Sonia Lalli , William Hoare , Alex Hodgson , Cathy Cole