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UK INVESTMENT NEEDS FOR THE LOW-CARBON ECONOMY

Over the past year there has been a lot of political conversation surrounding decarbonisation at both a national and international level. The conversation hPalace of Westminsteras been reflected in claims about a ‘Green Brexit’ 1 and updates following the USA’s decision to withdraw from the Paris Climate Agreement2 as the UK, and world at large, embarks on a decarbonisation mission to be sustainable and protect the environment.

However, despite the increased focus worldwide and the strategies set out in a range of UK Government documents such as the Clean Growth Strategy (CGS), the UK Industrial Strategy, and the 25 Year Environment Plan (25YEP) the dialogue on how a supporting infrastructure is set to develop has been underwhelming.

In this Industry Insight Powerstar has summarised:

  • Existing Government action towards decarbonisation
  • The potential of the low-carbon economy
  • The Aldersgate Group recommendations and future-proofing decarbonisation

 

Existing Government action towards decarbonisation

The UK has a clear decarbonisation target, set in the Climate Change Act of 2008 is to reduce greenhouse gas emissions by at least 80% of 1990 levels for the year 2050 and has legally binding carbon budgets to meet in the years before then to ensure it remains on track3.

Meeting these targets is likely to require a smooth energy transition and an increase in the uptake of technologies that can deliver clean energy. However, the release of the Clean Growth Strategy throws these targets into question because the strategy forecasts that the UK is currently set to miss out on the 4th and 5th carbon budgets for the five-year periods 2023-2027 and 2028-2032 4. Although the Government is able to carry forward overachievement from previous budgets to cover for not meeting later budgets, these powers are somewhat restricted,most notably by the condition that it must obtain and take into account the advice of the Committee on Climate Change (CCC) which is hesitant to allow this as it could lead to weaker ambition and undermine the UK’s position of leadership5.

The intended growth of the clean energy sector is best displayed in The Faraday Challenge – part of the Industrial Strategy Challenge Fund which is a Government backed initiative to provide £246m over the next four years on battery development for zero emission electric vehicles 6. To date, The Faraday Challenge has already seen £42M invested into research projects 7 and is perhaps the best case, albeit rare, example of the required infrastructure changes of the green economy receiving much needed attention and investment.

To maintain the dialogue that has developed, the Aldersgate Group, an alliance of leaders from business, politics and civil society, recently produced a report ‘Towards the new normal: increasing investment in the UK’s green infrastructure’ that highlights the steps needed to ensure that the infrastructure of the green economy is sufficient to support the needs of the energy transition and the future energy network8.

The potential of the low-carbon economy

The recommendations of the Aldersgate Group have not only been proposed from the perspective of developing a more environmentally-friendly nation but also from an economic perspective. The report summarises the scale of opportunity for the low-carbon economy with some key statistics which indicate its potential size and impact.

The economic perspective is best displayed within the forecast that the UK low carbon economy could grow from around 2% of the UK’s GDP today to 8% by 2030 and 13% by 20509 highlighting that the health of the UK economy and the low-carbon industry could become inextricably linked in the years to come as it becomes a larger part of the nation’s GDP.

Whilst there is some uncertainty surrounding the UK economy in the wake of the decision to leave the European Union10 it is likely that this increase in GDP share for the low-carbon economy will lead to a substantial growth increase overall as the average GDP growth rate in the UK in the 21st century is 1.9% which includes the financial crisis of 2008.Economic growth

The vast economic potential of the low-carbon industry is further illustrated by the statistic that the UK global market size for electric vehicles, just one sector of the low-carbon market, could be worth between £46bn – £95bn per year in 20308. When combined with the statistic that mitigating climate risks could save $35.4tn of the value of all global investment portfolios which is an equivalent value to the GDP of the European Union, it is clear that the investment in the low-carbon market needs to be made both to realise potential and to protect existing investments.

 

The Aldersgate Group recommendations and future-proofing decarbonisation

In light of this, the Aldersgate Group has suggested that up to £693bn investment in low-carbon infrastructure needs to be made by 2031 in the UK. The recommendations that have been made in order to fill this requirement are divided into the categories:

  1. Policy stability and market signals,
  2. Regulatory barriers and drivers,
  3. Smarter public spending, awareness-raising and education
  4. Innovation support.

The recommendations for the government centre on ensuring that the supporting infrastructure is built to the required standard to facilitate the fast and substantial growth of the low-carbon economy, which is evidenced by references in the report such as to ‘introduce flexible and smart regulations to create new markets and investment opportunities for infrastructure’ and ‘to commission an up to date study on priority investment areas that require Government intervention.’ These suggestions indicate that Government spending is vital for the UK to reach its aims of becoming a world leading low-carbon economy as set out in the CGS.

The implementation of the Aldersgate Group advice should be welcome, although the suggested increased level of investment into infrastructure must be carefully managed and communicated as to not deter organisations from investing and implementing current technology which can contribute towards a cleaner environment. This is especially true for those which may be uneasy that the pace of the development could render current technology obsolete, which would slow down the overall energy transition despite the increased funding.

To address this point, it should be made clear that there are technologies already available in the marketplace that embrace and support the fast-paced transition and are built to be future-proof to protect businesses from this occurring.

An example of this can be seen in the market leading energy storage solution Powerstar VIRTUE, which is manufactured bespoke to a business’s requirements to ensure viability not only in the present day but also in the future. Adoption of such technologies will result in a synergised approach where a business is able to future-proof itself whilst also being proactive and successfully implementing a low-carbon strategy immediately which will be able to boost energy resilience. Furthermore, by seeking a complete solution with multi-technology capabilities it can provide an enhanced business case and benefits, such as delivering process optimisation through voltage regulation or supply resilience through full Uninterruptible Power Supply (UPS) capabilities.

In conclusion it is clear that the decarbonisation process, although receiving much-needed publicity and ambitious targets, requires heavy infrastructural investment if it is to become as successful as hoped, especially within what are considered to be short time-frames for work of this magnitude.

The Government has made a promising start with the proposals put forward in the CGS and the Industrial Strategy while the research set to be undertaken in the Faraday Challenge could lead to innovation. However, there will be intense scrutiny as groups continue to assess the Government’s policy and pressurise it into ensuring that the infrastructural investment required for the low-carbon economy to flourish is implemented.

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