The Clean Growth Strategy: crispy on the outside raw in the middle

This piece originally appeared in BusinessGreen on 18th October 2017

I had grown tired of asking Ministers when the Clean Growth Strategy was going to turn up, and have had a variety of responses as to when it would. We journeyed along a year-plus road that led from the passing of the fifth carbon budget, past the date by which the plan should have emerged in response to the budget, and eventually – hooray – to last Thursday, when it finally emerged. So is it any good and does it do what it is supposed to do?

In thinking about that, we’ve got to remember that this is not any old plan devised by government to puff its position on something. It is THE plan that is supposed to follow, by law, the adoption of a climate budget – in this case the fifth carbon budget – agreed by Parliament last year. And it is also supposed to, by law, set out how the government intends to meet the terms of the budget – and in particular what additional policies over and above what is in place now they intend to adopt to keep us on track for the level of emissions reduction that the budget requires, in this case by 2032. And we know also that on present policies we are on track to miss the targets set by both the fourth and fifth carbon budgets by quite an amount of emissions.

So the answer to the first question is, yes, in many ways it is a good plan, with a range of policy directions set out in it that tick many boxes in terms of good intention on the key issues now with decarbonisation.

It endorses a strong further push on renewables over the next period, it sets out just what an ambitious programme of energy efficiency in buildings would look like to reduce and harness power use, and particularly heat so that targets can be met.

It commits to reviving the bruised programme of carbon capture and storage, which we know will be so vital in keeping energy intensive industries, and not only power stations, afloat.

 And although it is vague about exactly what is to happen in the immediate future about the EU Emissions Trading Scheme, it endorses the development of robust trading systems to shape energy use in the traded sector.

All good commitments, and to many a welcome relief from what had been seen as a series of retrograde steps on carbon reduction following the cancellation of carbon capture projects, the banning of onshore wind and the attack on solar deployment under the last Conservative-led government.

Quite how this enhanced commitment is actually going to happen is, however, a big question as far as the report is concerned. Extending the Energy Company Obligation by a few years and maintaining the status quo on funding for the Renewable Heat Incentive is, frankly, not going to get us very far with the monumental challenge of energy efficiency in buildings, and nor will the allocation of £100m to assist the development of CCS get us anywhere we need to be, especially since £1bn was taken out of CCS development just two years ago. We need much more clarity on how the support for these aspirations now turned into more solid policy will actually be executed – but that may be a question of consideration and clarification.

What can’t easily be considered and clarified in the report, though, is the bottom line of it all – and that is as the report candidly sets out (on page 41 to be precise) that, well, even with all these new policy instruments placed in the bag and assumed actually to work as well as one hopes, we’re still short of our targets for both the fourth and the fifth carbon budgets: on the fourth up to 2028 over emitting by six per cent and on the fifth by nine per cent.

That may not sound an enormous overhang for many but it does mean that on present policies, we will be leaving out in the atmosphere huge amounts of carbon which will have to be abated far more steeply in future budgets. And as a legal instrument, the plan has simply failed to discharge its responsibility of showing not how the government might go some way towards meeting the terms of carbon budgets, but how it will actually meet the budgets.

A report that shows that can then be judged in terms of its progress towards its goals, and corrections can be made en route where elements may fail to live up to expectations.

Here, we cannot correct our course to the budgets even if everything does swimmingly, because we remain fundamentally off target. The government really has to go away and come back, if necessary, with further policy instruments that show us if all goes well that we can keep our country on track with its climate targets for 2050.

Good news – now you see it, now you don’t

This piece originally appeared in BusinessGreen on 5th September 2017

There is always, as they say, good news and bad news. But it is rare, particularly in government circles, for apparently calculated bad news to cancel out good news quite so effectively.

So first, to keep to the old saying’s formulation, the good news.  This is that government seems now to have seriously ‘got’ the rapidly changing nature of the energy landscape and is producing plans to ensure that an energy transition which deals with all these disruptive changes can be managed effectively: smart grids, storage, self-generation, demand side management, low cost low carbon generation, and many more significant and important changes to how electricity in particular is generated, transmitted and used. The document that sets this out, published jointly with Ofgem, and entitled ‘Upgrading our Energy System: Smart Systems and Flexibility Plan’was published on July 24.

It both acknowledges the profundity of the energy revolution and seeks ways to harness it so that systems are both updated and made fit for the purpose of that revolution, and among other things calculates just how much consumer benefit will arise from getting it right. Government and Ofgem estimate that benefits will be between £17bn and £40bn in the period up to 2050. So roll on (or roll out) battery storage, aggregation of small scale generation, Demand Side Response, time of export tariffs and all that. The government is on your side now and plans to make the changes to the system that properly maximises the effect of these changes.

OK, the document is very light on detail, and there are many steps to be taken to implement what will be complex changes – but good news, I’m sure you’d agree.

And now the bad news… well, almost on the same day, Ofgem (also joint author of the aforesaid sunny uplands document) announced its ‘final decision’ on an issue that had been bugging precisely those people in the energy sector working away at that revolution – the storage companies, the distributed energy entrepreneurs, the local energy generators and so on – for a year.

The issue is simply this: do those kind of companies get an advantage that distorts the market by producing and using their power locally, since they arguably do not pay their share of the costs that otherwise would accrue to them of sending electricity up and down the country to its final destination? The added cost to high level transmission of these small (100MW or less) distribution connected generators is not high – perhaps £2 or so per megawatt hour. However, Ofgem thinks it is a serious distortion of the market and has decided that from 2019, everyone will have to ‘pay their way’ as if they were all big power stations connected to the National Grid system and sending out power across the country.

A small difference to transmission costs, but certainly a huge difference to the economics of those small power generators – a loss perhaps of up to 40 per cent of their revenue. Battery storage will face a loss on presently predicted revenues of over £56 per KWh – all making the viability of many of these new forms of power questionable, both in terms of present operation, and the fundability of new entrants, bidding perhaps into the capacity market, for support.

Or to put it another way, a dagger to the heart of precisely those forms of generation which are supposed to be supported and developed by the government in its damascene conversion to the merits of a distributed and smart system.

So why has this happened? Well, I don’t want to dwell on conspiracy theories too much, but the recent debate about the extent to which Ofgem can really act entirely independently of government in respect of energy price caps is perhaps instructive.

BEIS says it has the powers and could introduce a cap: Ofgem says it would need the signalling of a firm intention by the government to proceed before it realistically could act. What seems to be happening is that Ofgem is being leaned-on by government to come to the aid of the big energy producers who, among other things, are stubbornly failing to invest in new gas-fired power plants even when the considerable carrot of huge capacity market payments are dangled in front of them.

The capacity market, as is now well known, has had almost £6m of carrots consumed by largely big operators for existing plants without a single significantly sized new power plant being procured. Not having all those pesky new generation (in both senses of the word) outfits competing in capacity auctions, and in some instances withdrawing from established contracts because they are no longer viable, certainly shifts the landscape for large generation to use the market for its own long term investments more effectively.

But… at what long term cost? If indeed such short term thinking about how to prop up a failing market system for old capacity shoots new capacity squarely in the foot, then that is bad news indeed. And certainly bad news for the feasibility of the government’s new planning on distributed and local energy in the future.

What isn’t cool about cooling…

This piece originally appeared in Business Green on 18th July 2017

At last, heat has made it to the front page. The Cinderella of energy decarbonisation (electricity and transport being the two ugly sisters) now seems to be being taken far more seriously. Much discussion swirls about just how far heat is lagging in decarbonisation targets, and what needs to be done about it, with some renewed emphasis on heat decarbonisation strategies by the Committee on Climate Change and (I hope) some greater urgency on reshaping the Renewable Heat Incentive so that decarbonised heat options can be supported and progressed.

But what about Cinderella’s even more neglected twin, cooling? What is being done, or should be done about cold? And, by the way, is it a problem that ought to register on the decarbonisation radar? The problem recognition dial certainly still flickers around the zero mark, but a problem it certainly is. And as the climate changes, it will register more. This is because we’re living more and more in a world characterised by cooling demand – air conditioning in offices and shops, refrigeration for transport of food and perishables, and, of course, straightforward refrigeration in homes. Pretty much all cooling is undertaken by very old technology, vapour compression refrigeration, which uses refrigerants – usually hydrofluorocarbons (themselves a potent greenhouse gas) and huge amounts of electricity and sometimes even diesel to drive the refrigerants around to do their work.

The use of this old technology is already expanding fast as evidenced by the number of refrigerated vans driving around, spilling out far higher levels of NOx and particulates from their refrigeration units than the truck itself actually does. TheDemand for these technologies is projected to expand much further.

Already, air conditioning and refrigeration account for about 20 per cent of electricity supply, and this looks set to rise sharply as the UK increasingly adopts US levels of domestic air conditioning penetration. National Grid expects the UK’s use of domestic air conditioning to rise from a few thousand units today to perhaps six million by 2040, entailing a huge rise in electricity demand, along with seasonal and daily demand spikes that will distort present patterns of electricity use.

So, quietly, many of the gains we look set to make in energy efficiency and lowering our use of electricity may be offset by our appetite for cold – an appetite that somewhat ironically is likely to grow as the world heats up.

The debate on heat has swung markedly in recent years away from the earlier assumption that heat (delivered mostly by mineral fuels) could be decarbonised by electrifying everything. Awareness of the huge daily and seasonal variation in demand and the barely conceivable amount of new electricity capacity we would need to reliably supply all heat demand by electrical means has prompted a re-think in several quarters.

This has caused many to now see decarbonising heat as a portfolio job – some green gas injection, some electricity, some efficient district heating, and perhaps a move in the longer term to a hydrogen-based gas economy. However, creeping up behind all this effort looks to be the next possible consumer of improbable levels of new electricity demand: cooling. And at present there is next to no discussion (Prof. Toby Peters and Birmingham University, I honourably exclude you from this) on whether and how it might be possible to defuse this trend, other than by telling everyone that air conditioning will be banned and perhaps we should stop refrigerating all our food to boot.

There are possible ways forward for cooling that change the paradigm of refrigerants plus electricity, and come out at a far lower carbon cost. These include changing the refrigeration motors on vehicles to cold producing engines run on liquid gas, or capturing the cold from the transport of liquefied natural gas and reusing it for domestic cooling purposes, or engineering ‘night storage’ of cold during low demand hours for use at high demand times.

But right now, in the absence of any plan on cold decarbonisation or incentives like the RHI to aid their development and deployment, they will probably fall by the wayside as the march of electrically-generated, greenhouse gas-based refrigeration and aircon continues unchecked. Perhaps after the heating strategy and the RHI we should look to a Cooling Strategy and an incentive to get changes underway – I’ve come up with the ‘Inhibiting Cooling Electricity Carbon Ramping Incentive Measure’ (ICECRIM)… but maybe someone out there has got a better acronym.