Funding the zero-carbon future

Britain has set an ambitious - perhaps even daunting - target of cutting carbon emissions to net-zero by 2050. But it’s more achievable than we might think. Indeed, with smart forward planning and wise investment, Britain could lead the way to a cleaner, brighter future for us all.

Climate change is one of the biggest challenges our world will face over the next few decades. And it’s one that governments around the globe are taking increasingly seriously.

So far, 195 nations, including the UK, have signed up to the United Nations Framework Convention on Climate Change’s Paris Agreement, ratified in 2016, which aims to limit the increase in global average temperature to less than 2°C above pre-industrial levels.

Meanwhile, one of Theresa May’s final acts as prime minister was to make the UK the first member of the G7 group of nations to legislate (via the Climate Act 2019) for net-zero carbon dioxide emissions by 2050.

Given this focus, and a growing tendency of consumers to take ethical and environmental issues into account when choosing goods and services, businesses need to plan ahead for major changes as we transition towards a zero-carbon future. So what will this look like?

A blueprint for radical change

Even if carbon credits (a controversial method of “offsetting” carbon emissions by buying credits from low-pollution countries) are used in part to meet the UK’s 2050 target, the government’s own Committee on Climate Change notes that a steep mountain must be climbed in a very short space of time – just 30 years – in order to deliver a zero-carbon economy.

One obstacle is the UK’s capacity for rapid uptake of new technologies. The CCC recommends, for example, the widespread installation of heat pumps and other green technologies to heat homes – but it admits that as yet there are not enough qualified installation engineers to facilitate the required ramp-up in scale.

Transport is another key area. Currently there are only 210,000 electric cars in the UK. Just 1% of the population owns an all-electric car, while only 2% own hybrids. The purchase price of these vehicles remains a barrier, while government subsidies for electric cars have been cut, and there is still a shortage of charging points.

But few sectors of the economy will be impacted as directly as power generation – we need to move from a reliance on fossil fuels towards much greater use of clean, renewable energy. Here, considerable progress has already been made. Carbon emissions in Britain have fallen by 42% since 1990, reports energy regulator Ofgem. That’s more than any other major developed economy, and it’s mostly due to the near-eradication of coal usage for electricity generation.

However, progress has slowed. In 2018, the UK’s greenhouse gas emissions fell by just 2.5%, down from a 3% drop in 2017 – the smallest reduction since 2012. Ofgem says that for the UK to meet its climate change targets, “significant” investment is needed, especially in renewable energy technologies.

The British wind energy revolution

Renewables already produce nearly a third of Britain’s energy. Wind power specifically provides half of the UK’s renewable power, according to RenewableUK, the wind power generators’ trade association. Britain is also the world’s leading producer of offshore wind – offshore wind farms now generate enough power annually to run 4.5m homes, according to RenewablesUK.

How has this been achieved? It helps that via the Renewables Obligation, energy companies must now by law supply a proportion of their electricity from green sources or risk being fined. This creates demand for “green” energy generation. Meanwhile, the cost of new offshore wind power has halved since 2015. That’s partly down to evolving technology, but also due to smarter financing models.

For example, Britain’s offshore wind capacity is set to double over the next ten years, as the government has incentivised investment through its “Contracts for Difference” scheme. In effect, renewable developers bid for the chance to lock in a price for the electricity they will sell over a 15-year period. This protects them from volatile energy prices, while competition between bidders drives down costs.

The need for battery storage and a ‘smarter’ grid

Significantly more investment is needed, both in the UK and across the world, if wind power is to reach its full potential. One problem with both wind and solar energy is their intermittent nature. This will mean investing in a “flexible” or “smart” national grid that can better cope with these sources of energy, with both domestic and industrial users incentivised via more responsive pricing to use energy during off-peak periods.

Intermittent generation will also require huge investment in energy storage, to capture energy when it’s generated and release it when it’s needed. Short-term storage, such as batteries and pumped hydropower, could be used to store green power for use when there is little wind or solar power available. Longer-term storage solutions include air storage, flow batteries or hydrogen storage.

There is still much to be done to achieve the transition to a zerocarbon economy. However, according to the government, Britain’s lowcarbon economy could grow at a rate of 11% a year – four times faster than the rest of the economy – until 2030, potentially creating up to two million “green collar” jobs in the process. With governments everywhere hungry for new ways to boost growth, this looks like an irresistible opportunity.