Infrastructure is vital for accelerating the development of renewable energy

6 Jul 23

The route to net zero is clear: electricity generation needs to come primarily from low-carbon energy sources.

As if anyone needed it, the past 18 months have offered an all too vivid lesson in why the transition away from volatile fossil fuels is not just an environmental duty but an economic necessity.

The OBR expects natural gas to remain expensive – three to four times the average price before Russia’s invasion of Ukraine – until 2028. It remains puzzling to me how anyone can seek to argue that the answer to a gas supply crisis is doubling down on gas use, when cheaper, cleaner alternatives are available.

And the UK has a track record of which we can be reasonably proud. Electricity generation has made significant progress in reducing greenhouse gas emissions over the past decade, decarbonising faster than any other sector and playing a large role in the UK’s overall progress on reducing emissions.

The share of electricity generated from renewable sources has grown from less than 10% in 2010 to 40% today.

The contracts for difference mechanism is supporting new capacity in renewable electricity at materially lower cost than today’s high electricity prices set by gas generation. The long-term agreements deliver value for money and price certainty to consumers, as well as revenue stability for developers to encourage investment. Against this backdrop, the UK’s level of ambition is encouraging.

Reaching high

In the National Infrastructure Strategy published at the end of 2020, the government broadly endorsed the National Infrastructure Commission’s recommendation that the UK should aim to deliver 65% renewable electricity by 2030. It then committed in its subsequent Net Zero Strategy to a fully decarbonised power system by 2035, subject to security of supply. This is achievable. But the scale of the challenge remains large. While reliance on coal and oil has dropped significantly, gas remains the largest single source of electricity generation, representing around a 40% share. We will need to deliver new-generation infrastructure at pace to decarbonise the system by 2035.

Weather power

Thankfully, the pathway to making the necessary shift is clear – electricity generation needs to come primarily from low-carbon energy sources like wind, solar and nuclear, complemented by storage and interconnection with other countries and flexible, low-carbon generation, such as gas with carbon capture and storage technology.

The government already has a stated ambition to increase generating capacity from offshore wind farms to 50GW, including up to 5GW of floating offshore wind, by 2030. For context, offshore’s capacity is currently about 14GW, while the operating capacity of the UK’s current nuclear plant fleet is around 7GW.

To help meet this goal, onshore wind and solar are again able to compete in contracts for difference auctions, with the 2022 auctions awarding contracts to 2.2GW of new solar capacity and 900MW of onshore wind in Scotland. Before Christmas, the government also committed to consult on loosening the planning restrictions for onshore wind in England.Needless to say, delivering all this will require significant levels of upfront capital investment to deliver a huge number of installations across the country – the biggest shift in national infrastructure since the industrial revolution.

But whenever we talk about increasing our reliance on renewables, the same concern arises. I wish we had a GW of electricity for every time someone asked what happens when the wind doesn’t blow and the sun doesn’t shine!

Those reservations, of course, have a sound basis. Renewable electricity generation from solar or wind cannot be turned on when needed in the way a gas power plant can. Flexible, low-carbon sources of generation and electricity storage will be vital for a highly renewable electricity system.

Happily, there is evidence that the electricity storage market is maturing. Battery storage capacity exceeded 1GW for the first time in 2021, and the pipeline of battery storage projects has expanded rapidly in the past three years. The government will need to ensure that this pipeline of projects can deploy quickly and start providing benefits to the system.

‘We will need to deliver new-generation infrastructure at pace to decarbonise the system by 2035’

The government is also supporting the development of low-carbon gas and bioenergy power plants (which will use our developing carbon transport and storage infrastructure) and hydrogen gas power plants, which a number of organisations have committed to commercialising by the mid to late 2020s.

Stand and deliver

In addition to supporting more low-carbon generation, there is a further role infrastructure can play in decarbonising electricity generation, and that is in smart demand-management systems, flexing how and when energy is used – for instance, using electric vehicles as mobile batteries through ‘vehicle to grid’ technology.

Demand flexibility is common in other countries, such as Australia and the US, where it enables them to meet up to 15% of peak demand for electricity. But it is currently underused in the UK, although we are watching the progress of the system operator’s Demand Flexibility Service with interest. The long-term goal must be to ensure that a range of diverse technologies can participate and bring flexibility benefits to the system.

Opportunity knocks

One thing that unites these three strands – renewables, low-carbon flexibility and demand management – is the economic opportunity provided by the scaling up of new technologies, particularly for communities in real need of fresh stimulus.

We need to be clear eyed that the net-zero transition will also mean a transition in employment – from fossil-fuel-based processes to greener ones – and we should always be wary of bold claims about potential job growth from new technologies.

But as I have noted, net zero will mean a big shift from operating expense to capital expenditure. That opens up the possibility of a whole new breed of jobs for decades to come, including in exporting British knowledge overseas.

Another uniting factor is that our transmission and distribution networks will need to be ready to support the growth of renewables, storage and demand flexibility. This will mean building considerable new network infrastructure. The CEO of National Grid has said that we will need to build about seven times as much infrastructure in the next seven or eight years than we built in the past 32.

At the same time, these networks will also be managing increased demand – such as from electric vehicles and heat pumps – as other sectors decarbonise. Flexible technologies will be vital to mitigating the impact of this demand on the network.

The government’s Smart Systems and Flexibility Plan (published in July 2021) and moves to digitise the energy system are a start, but progress on delivery needs to be accelerated. The advent of a Future System Operator – an independent body to oversee long-term planning of energy networks – will be a key development.

Making it happen

But what else needs to happen for our infrastructure to support the net-zero goal?

First, the government must remain steadfast on the march towards renewables. Current policy appears to be pointing in the right direction, but wobbles over the past year (on issues like land use for solar) have not helped create a stable environment to encourage inward investment.

So it is right that we make full use of new auctions for onshore wind and solar, and that Ofgem is set up and has the governance structure to allow anticipatory investment in the grid to unlock connections quickly.

Second, government’s official guidance must make clear the centrality of renewables to achieving net zero, boosting energy security and reducing prices. We urgently need updated national policy statements for energy (as well as other sectors, like water) to ensure that planning decisions are made in accordance with this vision. This will reduce unnecessary administrative delays and provide greater clarity for operators, investors and communities on the importance of this new infrastructure.

Third, that clarity must be provided alongside a genuine but proportionate mechanism to engage local communities in the design and operation of new facilities that could affect their local environment. The most recent survey by the Department for Business, Energy & Industrial Strategy suggests almost nine in 10 of us are supportive of solar energy, with 83% backing offshore wind and 78% supporting onshore wind. But we know the reality can be different once specific schemes are proposed.

I don’t blame communities for this. There is growing recognition that renewables offer a cleaner, cheaper source of power – but perhaps not unreasonably, communities are keen to see local benefits to compensate for disruption.

Industry and regulators must explore ways of providing incentives to communities that host new infrastructure, most obviously by offering people cheaper energy deals in neighbourhoods close to major developments. As I have said before, although our current market arrangements make this complicated, if we can drive a car on energy generated by the sun, I am sure we can find a way of ensuring that communities share in the benefits that low-cost renewables bring us all.

Collaborating for change

In a similar spirit, delivering the infrastructure required is not all down to the government. As I have set out, national policy does play a role. But, ultimately, it will be private businesses that actually plan for and deliver this transition on the ground.

Indeed, this will involve a range of professions – architects, planners, lawyers and, of course, accountants – collaborating efficiently and firmly orientated towards the end goal.

‘The CEO of National Grid has said that we will need to build about seven times as much infrastructure in the next seven or eight years than we built in the past 32’

For our own part, the National Infrastructure Commission will be publishing the next National Infrastructure Assessment this autumn. This will be the culmination of months of research, analysis and consultation on long-term priorities for infrastructure policy and funding. A core pillar of this will relate to the need for low-carbon flexibility in the power system, as well as recommendations on how to ensure that the various technologies discussed above are progressed effectively. The assessment will contain a number of other strands related to net zero – including the future for home heating, and the networks that might be required for future hydrogen and carbon capture and storage users.

It will set out a vision for how infrastructure will help to deliver not only net zero but also stronger climate resilience and the levelling up of economic opportunities across the entire country.

Image credit | Paddy-Mills

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