Ten steps to net zero

The race to reach net zero by 2050 has begun. From China to the US, governments are heeding scientists’ warnings that decisions and actions – or lack of both – taken this decade will heavily impact the chances of meeting the internationally agreed Paris Climate Change target. Yet, despite having decades to figure it out, nobody really knows what a clear pathway to net zero looks like; not all the technology is commercially developed and, as governments are all too aware, some policy changes will be politically tricky.

Nevertheless, time is of the essence, and after a string of delays, UK Prime Minister Boris Johnson in November finally presented his opening gambit in the decarbonisation race: a £12bn-backed 10-point plan for a green industrial revolution. The plan was widely welcomed as the first phase to putting the country on a pathway to achieving net zero by 2050, even if the overarching Net Zero Strategy is still AWOL and not expected until sometime before Glasgow hosts the COP26 in November 2021.  However, as it stands today, how achievable are the individual aims and what more is needed to kickstart the new green economy?

Advancing offshore wind

Offshore wind is already a UK success story; Britain boasts the largest installed base and project costs are falling rapidly. Its perhaps unsurprising, therefore, first on Johnson’s list is quadrupling capacity to 40GW by 2030. To achieve this the government will ‘aim’ to double capacity procured through the Contract for Difference auction set for next year to 12GW, including 1GW floating wind.

The investment appetite for the sector is strong, says Daniel Grosvenor, head of infrastructure at Deloitte: “Offshore wind is a now opportunity, with a well-known pipeline of projects”. According to September data from Renewable UK, there are 10GWs operating already, with a further 30GW either under construction, with planning permission, in the planning process or under development.

However, a key challenge will be managing the extra electricity capacity into the grid, more about which should be explained in the Offshore Transmission Network Review expected in 2021. In the delayed Energy White Paper (EWP) published in December, the government highlight the potential of using wind power for hydrogen electrolysis and for electric heat for homes. However, as Emma Champion, analyst at BloombergNEF, notes: “That’s not really a bridge that’s been crossed yet.”

Driving the growth of low-carbon hydrogen

The government is aiming for 5GW of blue hydrogen production capacity by 2030, produced with carbon capture, usage and storage (CCUS) which will make it ‘low carbon’. Currently a handful of extremely early-stage projects are underway, mostly centred around the government’s net zero industrial clusters initiative. If final investment decisions are made they could possibly start producing between 2024-2026. However, while there is faith in the various technologies and their cost reduction potential, lack of clarity on business models and direction of deployment is a much-highlighted stumbling block.

It’s hoped the long delayed – now expected in 2021 – Hydrogen Strategy will provide some answers. Key points of uncertainty are: where will the hydrogen be used – for transport, heating, in the aerospace and maritime sector or in all of them - and crucially, when will it arrive? What are the pathways to deployment? Time is running out if the UK is to keep up with its competitors, such as Germany. As a recent Deloitte report notes, financial decisions need to be made now: ‘In the absence of a nationally coordinated effort hydrogen development might be fragmented and limit cost reduction’.

This is especially true for the UK’s heating needs and industrial players, says Dr Mark Burrows, strategic client lead at npower Business, “They will struggle to convert their processes and plants without a firm understanding of when hydrogen will come online,” he says.

Delivering new and advanced nuclear power

To meet the expected rise in demand for low-carbon electricity in sectors like heat and transport, the government is pursuing options that include large-scale nuclear, small modular reactors (SMRs), which are about 40 times smaller than conventional light water reactor sites, and novel advanced modular reactors (AMRs).  

The Energy White Paper (EWP) outlines an aim to bring at least one large-scale nuclear project to the point of final investment decision by the end of this parliament, and the government is already in talks with EDF about the construction of a nuclear plant at the Sizewell C site.

For both SMRs and AMRs the government says it wants to have demonstrator plants by early 2030. However, Ian Griffiths, partner, construction and infrastructure lawyer at Shakespeare Martineau, and formerly of Horizon Nuclear Power, says that while SMR technology is feasible – Rolls Royce has announced early-stage plans to build up to 16 SMRs in the UK – AMRs are considered within the industry as merely ‘Powerpoint reactors’ and probably not feasible in this timeframe.

Other challenges include, he says, the low levels of funding, siting issues, high cost of licensing, and delays to the EWP and Regulated Asset Base (RAB), which have already caused a lag in understanding government funding structures, plus skills shortages and regulatory capacity post Brexit.

In the future, the Office for Nuclear Regulation will take over some work from the European regulator, Euratom, and there are questions over ‘regulatory bandwidth’ says Griffiths. Time is running out, he adds: “We can’t wait for a demonstrator; we need something now.” However, the National Nuclear Laboratory says the first SMR won’t be seen until at least 2029, but that others are likely to follow soon after.

Accelerating the transition to electric vehicles

Encompassing national EV infrastructure and manufacturing, this point in the plan is geared towards getting the country ready for the 2030 ban of the sale of new petrol and diesel cars and vans (except some hybrids). James McKemey, head of insights team at EV charging firm Pod Point says the deadline effectively ‘de-risks’ EV investment decisions in the automotive space and follows trends already happening. Huge reductions in battery costs means EVs “will probably be cheaper to manufacture than an internal combustion engine car by the mid-2020s,” he adds.

However, challenges remain: range, building infrastructure ahead of demand, and supply of EVs. While the government funds levied (£2.8bn) are broadly ‘appropriate and well targeted’, according to McKemey, there is still a ‘chicken and egg’ problem: “We think a priority should be an allocation of EV stock from manufacturers,” he says. Part of the government’s ambition is to establish an EV manufacturing base in the UK – the Nissan Leaf is already produced here – however, this will be trickier post-Brexit.

“The last-minute nature of manufacturing supply chains means we will need to very rapidly make free trade agreements to partake in the global automotive trade,” adds Tim Chapman, ICE fellow and director at Arup Group.

Green public transport, cycling and walking

Surface transport is the UK’s biggest emitter. The government’s plan to reduce emissions includes shifting travel to more active and sustainable transport by investing in rail and bus services, along with measures to help pedestrians and cyclists. However, the detail is as yet missing because the transport decarbonisation plan due in December is delayed until spring 2021. The Committee for Climate Change’s (CCC) Sixth Carbon Budget published in December, however, assumes that approximately 9 per cent of car miles can be reduced or shifted to lower-carbon modes by 2035, increasing to 17 per cent by 2050.

Tim Anderson, group head of transport at the Energy Saving Trust says some of this has already happened due to the pandemic, including reduced business travel and a renewed interest in cycling. However, he adds there needs to be a “greater cultural change in the way we move around”. Low-traffic neighbourhoods introduced by some councils to reduce car use, for example, proved highly controversial.

There are also concerns the pandemic will increase car use in the longer term, putting further financial strain on public transport. More needs to be done, says Anderson, “Especially to reduce business travel and electrify large delivery networks”. Heavy Goods Vehicles (HGV), for example, are not addressed in the plan.

Jet zero and green ships

Perhaps the most challenging on the list, the point focuses largely on R&D for sustainable fuels, including £15m for FlyZero, a 12-month study delivered through the Aerospace Technology Institute (ATI) and a £20m into the Clean Maritime Demonstration Programme. Graham Smith, senior electrochemistry research scientist at the National Physical Laboratory says hydrogen and synthetic fuels will be paramount for both sectors, especially hydrogen, which ammonia is derived from.

The challenges, which are vast, include a potential skills shortage, scaling up the fuel-cell technology, building infrastructure and establishing business cases to incentivise switching. “The economics are challenging; the market isn’t going to push this unless there’s some carbon pricing mechanism or regulatory mechanism. It’s just a more expensive technology,” says Smith. Smaller domestic planes and ships will be easier to decarbonise; however, timeframes are tricky as manufacturing is measured in decades.

“I’d say the UK is already falling behind, the level of funding should be closer to the billion mark, like in Germany, as opposed to the tens of hundreds of millions. Unlike us, France and Germany have got well-established hydrogen strategies,” adds Smith. Furthermore, international shipping and aviation are not currently included in the net zero target perhaps further reducing the incentive to switch.

Greener buildings

The greener buildings part of the plan focuses on making homes more energy efficient, with support for insulation, as well as moving away from fossil-fuel powered boilers and installing 600,000 heat pumps per year by 2028. Although the 10-point plan document states it’s left ‘open’ as to whether ultimately hydrogen heating is pursued or electrified heating system or a mixture of both. However, it is now policy that gas boilers will be banned in new builds from 2025.

Andrew Leiper, a Net Zero Carbon leader at Max Fordham says while the heat pump ambition is a ‘good incentive and target’ the funding falls short. “600,000 heat pumps per year is achievable; the industry could train installers to do it but people may not afford to buy heat pumps or may not have the motivation to do it,” he says. The chancellor is offering £122m next year to support ‘clean heat networks’, however, Leiper says that’s only around £200 per heat pump which costs around £10,000 to install. He adds that more education around the technology is needed to encourage take-up. “When we talk to big developers we do still hear them say that their buyers want gas boilers,” he says.

A Heat and Buildings Strategy is expected to be published next year that will provide more information on the strategy. When it arrives, Darren McMahon, marketing director of Viessmann, the heating systems manufacturer, says he’d like to see a simple and effective structure for installers, helping them to transition to low carbon heating, because “even the most motivated and resourced businesses are currently overwhelmed with the level of accreditations, paperwork and courses required – this is time, money and patience that may be in short supply.”

Investing in carbon capture, usage and storage (CCUS)

Central to the low carbon hydrogen ambition is CCUS. The government wants to capture 10Mt of carbon dioxide a year by 2030, the equivalent of four million cars’ worth of annual emissions. It will invest up to £1bn to support the establishment of CCUS in four industrial clusters, creating ‘SuperPlaces’ in areas such as the North East, the Humber, North West, Scotland and Wales. Chapman of ICE says the industrial hubs are a “good strategy” because CCUS infrastructure “is big and heavy”, so it’s important to have everything close by.

“Doing this on a big scale is good, as is investing a chunk of money, but the main challenge is the technology hasn’t been proved at scale yet,” says Chapman. Tony Alderson, carbon capture and storage technical lead at management and consultancy firm WSP, adds the additional cost for CCUS [for hydrogen production] currently isn’t offset by the savings made by not having to buy emissions permits for the CO2 that’s no longer emitted to atmosphere.

Therefore, “support mechanisms need to be put in place to balance penalties for emissions, plus support for technologies which eliminate those emissions”. But he does think this will happen in time.

Protecting our natural environment

Sequestration of CO2 from the natural environment is a key part of meeting the 2050 net zero target. The government says it will ‘protect and improve’ 30 per cent of UK land by 2030 creating the equivalent of over 30,000 football pitches of wildlife-rich habitat. In the shorter 10 Point Plan outline, it states more specifically ‘planting 30,000 hectares of trees every year’ but this is omitted from the longer document. While there’s little detail about what will actually happen, in the CCC report, it states that around 9 per cent of agricultural land will be needed for sequestration by 2035, which it says can be achieved by diet change, food waste reduction and productivity improvements.

Dr Paul Burgess, from Cranfield University, who works on management of trees on farmland, says, while levels of tree planting in England has been ‘minimal’, there’s been progress with the combining of The Woodland and Peatland Codes to create a combined UK Land Registry, which will “increase the incentive to plant trees,” he says. Additionally, once the UK exits the EU Common Agricultural Policy there are plans to replace these payments with rewards for increasing biodiversity and planting trees, a direction the EU is also considering.

However, Burgess says, delivery will be key: “The financial pressures of Covid and Brexit present a risk public money into the rural sector will decline; planting trees is quite a long-term commitment and the regulatory environment is unclear at present.”

Green finance and innovation

Under this initiative the government has committed to raising total R&D investment to 2.4 per cent of GDP by 2027 and in July 2020 published the UK Research and Development Roadmap. It will also launch a new National Infrastructure Bank in Spring, plus the UK’s first Sovereign Green Bond in 2021 ‘subject to market conditions’. With the entire 10-point plan the government hopes to raise three times as much capital as it puts in. co-founder and CEO of Carbon13, a venture builder for the climate emergency, Chris Coleridge says this goal is one of the most achievable in the plan: “The UK is already the leader in Europe in generating ‘unicorn’ start-up innovations, has probably the best tax regime for early stage start-up investors in the world, and the most favourable public opinion towards entrepreneurs of almost any European country,” he explains.

Grosvenor of Deloitte echoes this sentiment: “UK financial institutions are ready to invest, it just needs to be the right sort of infrastructure project. Offshore wind with a CFD is already in that category, but we need to set the market frameworks and the business models for things like hydrogen and CCS, that make it as attractive an investment proposition going forward,” he says.