A decision to achieve net zero emissions by 2050, announced by the Prime Minister on 12 June 2019, has sparkled a new round of discussion on the underlying policy and statutory instruments. Managing Partner of Gutovska & Partners Olga Gutovska commented on the details and future of the policy.
Zero emissions target will need to become an integral constituent of a much wider UK clean energy strategy. UK government pioneered in introducing the framework for addressing low-carbon development with Energy Act 2013 and Clean Growth Strategy, and the changes to the Climate Change Act shall be made to reflect the new zero emissions target by 2050. The new target triggers a series of discussions. Some questions that need to be answered are: secure funding and investment, public-private partnership and research, social responsibility and awareness.
We will most likely see new statutory instruments implemented: the regulation providing support for customers education on low-carbon development, the regulation on subsidies for low-carbon development and support of business committed to low-carbon; the regulation on Feed-In Tariffs, the regulation on creating an Independent System Operator (ISO); the regulation on exempting storage installations from balancing charges, and from all double-charging of network charges; the regulation simplifying the requirements for businesses to measure and report on energy use; the regulation establishing an Industrial Energy Efficiency; the regulation strengthening energy performance standards for new and existing homes under Building Regulations.
The UK was the first state to introduce the low carbon development legislation with its Energy Act in 2013. It took fairly radical approach to achieving low carbon development, previously paved in Low Carbon Transition Plan in 2009 , which specified a set of measures government needs to take. Some of them were successfully taken, as reforming the central authority in energy field. The Department of Energy and Climate change was reformed into Department for Business, Energy & Industrial Strategy (BEIS). Two legal challenges for the UK in the field of low-carbon development remain unsolved. The first one is a single energy policy. Adoption of the single low-carbon development policy and regulation specified above will contribute to successful implementation of Energy Act 2013 and achieving the goals the UK set in Energy Strategy and the new zero emissions target. It will provide necessary tools and mechanisms to allow wider development of green technology, social responsibility of customers, and environment protection. Also it will clarify and detail the provisions of Energy Strategy and address the issues laid out in The Low Carbon Transition Plan 2009.
Several challenges for implementation of the low-carbon targets were identified almost 10 years ago with Low Carbon Transition Plan. It was back then in 2009 when a foreword to the Plan secretary of state of energy and climate change defined a transition to a low-carbon economy as one of the key issues of the 21st century and the UK is committed to low-carbon energy development. The Plan identified the challenges in low-carbon energy development in the United Kingdom as follows:
new investment in low carbon infrastructure;
managing the risks associated with increasing dependence on energy imports;
rise of cost of energy;
support of development and use of green technology;
bigger and smarter electricity grid;
cutting emissions from transport;
targeted support for low carbon industries;
need of strong global network.
Various discussions how to approach the challenges were held since then. Sir Philip Lowe, reporting “Brexit and Energy”, suggested that the biggest energy policy challenge is to guarantee that supplies of low-carbon electricity are affordable for households and competitive for businesses. He argued that UK will need to invest more in new electricity generating capacity and pay higher prices – arguably with less security of supply – and accept a bigger role for the state in the energy sector. Storage technologies, from large hydroelectric reservoirs to household batteries, can store electricity at times of peak for use at times of need, but the deployment of storage is obstructed by archaic regulation and unfair ‘doublecharging’, and this needs to be addressed by the Government. Demand Side Response could empower consumers to manage their energy use in line with system-wide need, but a more detailed Government strategy is needed to help this solution reach its full potential. Greater interconnection with European neighbours will improve the UK’s ability to meet peak demand, though we note that Great Britain is likely to remain a net importer of electricity.
Government still needs to make several investments, to which it committed in Clean Growth Strategy. They are to invest around £3.6 billion to upgrade around a million homes through the Energy Company Obligation (ECO), and extend support for home energy efficiency improvements until 2028 at the current level of ECO funding, to invest in low carbon heating by reforming the Renewable Heat Incentive, spending £4.5 billion to support innovative low carbon heat technologies in homes and businesses between 2016 and 2021; to provide up to £20 million to support a new clean technology early stage investment fund; to invest around £162 million of public funds in research and innovation in Energy, Resource and Process efficiency, including up to £20 million to encourage switching to lower carbon fuels. Also the government committed to support innovative energy technologies and processes with £14 million of further investment through the Energy Entrepreneurs. UK also aims to accelerate the uptake of low emission taxis and buses by providing £50 million for the Plug-in Taxi programme, which gives taxi drivers up to £7,500 off the purchase price of a new ULEV taxi, alongside £14 million to support 10 local areas to deliver dedicated charge points for taxis.
Another challenge, unique for the UK compared to other pioneering governments, is the so-called green finance.
In 2017 Parliament Environmental Audit Committee issued the report on Green Finance, emphasising its importance for accumulating necessary investment to meet emissions targets. The Green Finance is a partnership between the financial and professional services sector, academics and civil society, which promotes the UK as a leading global centre for green finance. It operates also through participation in senior global multilateral fora such as the Financial Stability Board’s Task Force on Climate-related Financial Disclosures (TCFD), which recently published its final recommendations. The first offshore green bond issued by an Indian entity and the first green bond issued by a Chinese bank were listed on the London Stock Exchange and 50 green bonds denominated in seven currencies with a value of $14.8 billion are now listed in the UK137. On 31st July 2017, Anglian Water released the first ever public utility Sterling Green Bond on the London Stock Exchange.
There is also a challenge of reducing power costs for households and businesses. It may be solved by adopting a special regulation implementing the smart systems plan, which will help consumers to use energy more flexibly. Also to reduce power costs BEIS may cooperate with Ofgem and National Grid to create a more independent system operator, which will keep bills low through greater competition, coordination and innovation across the system. Another regulation needed is the one to oblige Ofgem to impose a cap on standard variable and default tariffs across the whole market. Associated challenge was to improve standards on the 1.2 million new boilers installed every year in England and require installations of control devices to help people save energy. To achieve that the government has adopted new Boiler Plus standards in 2017. Standards are designed for domestic boilers to ensure all households have a reasonable level of choice and control over their heating to enable them to achieve comfort and efficiency without increased bills.
Research and development are also important in achieving low-carbon development in the UK. The Clean Growth Strategy provided that it is necessary to develop government’s programme of research and development in to greenhouse gas removal. It should explore the technologies and support the recycling of heat produced in industrial processes. For this purpose the £8.6 million UK research programme on greenhouse gas removal was introduced with NERC.
The joint industrial decarbonisation and energy efficiency action plans 2017 set out how government will work with industry to achieve the most cost effective path to the decarbonisation required to meet our carbon budgets, while realising opportunities for growth, job creation and exports and improving our energy security. The plans cover 7 energy intensive sectors: cement, ceramics, chemicals, food and drink, glass, oil refining, pulp and paper.
There are also other legal challenges of low-carbon development in the UK, directly mentioned in the Clean Energy Strategy. They present the need to adopt the following regulations:
- regulation providing support for customers education on low-carbon development
- regulation on subsidies for low-carbon development and support of business committed to low-carbon
- new regulation on Feed-In Tariffs
- regulation on creating an Independent System Operator (ISO)
- legislation on planned ban of sale of conventional diesel vehicles in 2040
- regulation on exempting storage installations from balancing charges, and from all double-charging of network charges
- Resources and Waste Strategy
- regulation simplifying the requirements for businesses to measure and report on energy use, to help them identify where they can cut bills
- regulation establishing an Industrial Energy Efficiency Scheme to help large companies install measures to cut their energy use and bills
- regulation strengthening energy performance standards for new and existing homes under Building Regulations
In conclusion, the UK was the pioneer in introducing legal framework necessary for low-carbon development and the decision is not therefore surprising. Currently most of the legal challenges associated with it are addressed in relevant legislation, some SI needed to cover all of them. The needed regulations are: regulation providing support for customers education on low-carbon development; regulation on subsidies for low-carbon development and support of business committed to low-carbon; regulation on Feed-In Tariffs; regulation on creating an Independent System Operator (ISO); regulation on exempting storage installations from balancing charges, and from all double-charging of network charges; regulation simplifying the requirements for businesses to measure and report on energy use, to help them identify where they can cut bills; regulation establishing an Industrial Energy Efficiency Scheme to help large companies install measures to cut their energy use and bills; regulation strengthening energy performance standards for new and existing homes under Building Regulations. Also the legislation to confirm UK’s intent to ban sale of diesel vehicles from 2040 is needed. Many ongoing projects and programmes require constant supervision of government, such as Green Finance Initiative and research programme on greenhouse gas emissions. UK also needs to secure the funding necessary for implementing all measures stipulated in its Clean Energy Strategy.
The statutory instrument regulating subsidies for low-carbon development and support of business is needed to facilitate the input from the industry. The regulation on Feed-In tariffs and Independent System Operator shall be adopted to facilitate the development of electricity market. On top of that, there must be appropriate regulation for reducing power costs for households and businesses. It may require implementing the smart systems plan to help consumers to use energy more flexibly. Also to reduce power costs the government may cooperate with Ofgem and National Grid to create a more independent system operator, which will keep bills low through greater competition, coordination and innovation across the system. Another regulation needed is the one to oblige Ofgem to impose a cap on standard variable and default tariffs across the whole market.
Resources and Waste Strategy shall be created to facilitate biomass energy and protect environment in the UK. Industrial Energy Efficiency Scheme needs to be adopted to help large companies install measures to cut their energy use and bills. A legal challenge unique for the UK is the successful implementation of Green Finance Initiative. The government committed to the initiative as a partnership between the financial and professional services sector, academics and civil society, which promotes the UK as a leading global centre for green finance. Implementation of the initiative needs appropriate control from the government. The UK also faces the challenge of regular National low carbon transition and mitigation plans. The plans shall specify the policy measures and actions required to achieve the low-carbon targets.