Green levies to shift from electricity to gas ‘this decade’

The government has pledged in its Net Zero Strategy to look at options, including carbon pricing, to shift green levy costs from electricity to gas, while announcing £620 million of additional funding to encourage the uptake of electric vehicles (EVs).

The strategy, published today (19 October), is the centrepiece of a swathe of long-awaited policy documents (see below) mapping out the government’s proposed steps for meeting its 2050 net-zero emissions target.

This includes moves to reduce the cost of electricity in a bid to harmonise the running costs of gas boilers and heat pumps for home heating.

The strategy says up to 1.7 million heat pumps could be being deployed per annum by 2035, nearly treble the target in last November’s green recovery plan for 600,000 installations of the devices by 2028.

The strategy says that when the current gas spikes subside, the government will look at options to shift or rebalance energy social and environmental policy “away from electricity to gas over this decade”.

This will include looking at options to expand carbon pricing and remove costs from electricity bills while minimising the impact on the overall level of bills.

The biggest single new spending commitment in the strategy is further funding of £620 million for zero-emission vehicle grants and EV Infrastructure, which will be focused on local on-street residential charging.

Other transport announcements include a commitment to make the rail network net zero by 2050 and an ambition to remove all diesel-only trains by 2040.

The strategy also includes a commitment to review the frequency of the Contracts for Difference (CfD) auctions in a bid to accelerate deployment of wind and solar power.

It also backs the deployment of first-of-a-kind power carbon capture & storage (CCUS) plant(s) and reform of the governance of the entire energy system in a bid to achieving the UK’s net-zero ambitions while meeting consumers’ needs.

In order to meet the emissions reduction targets in the Sixth Carbon Budget (CB6), the strategy says all low-carbon power technologies will need to be rolled out “at or close to, their maximum technical limit”.

Unabated gas generation will be used less frequently in the future, running “only when the system most needs it for security of supply”, according to the strategy.

However, the document says that waiting for new technologies to emerge before deciding to deploy nuclear and carbon capture-enabled gas power at scale could “put our CB6 and net zero ambitions at risk”.

It says: “Over the next decade we need to continue to deploy all known low-carbon technologies at scale to ensure optionality is maintained, whilst developing new options to mitigate delivery risk and reduce costs.”

In order to deliver the emissions reductions required to keep the UK on track for CB6, the strategy says the UK will need a “significant expansion” of power CCUS beyond the energy white paper’s commitment of one plant by 2030.

For new homes, the strategy says the government will consult on whether to implement its plans to end new gas grid connections or remove the gas distribution networks’ duty to connect.

It also says the government is considering an “ultimate backstop date” that all homes meet a net zero minimum energy performance standard before 2050, where “cost effective, practical, and affordable”.

The strategy’s headline commitments include pledges to work with the grain of consumer behaviour so that no one will be required to “rip out their existing boiler or scrap their current car”, while ensuring that the biggest polluters will pay the most for the transition through fair carbon pricing.

The strategy claims that the economy-wide transitions set out in the document will enable the UK to meet the emissions reductions targets outlined in the fourth and fifth Carbon Budgets and put the country on track to meet the sixth.

Alongside the Net Zero Strategy, the government has today published:

• The Treasury’s net zero review
• The Heat and Buildings Strategy
• Further policy design proposals for the Clean Heat Grant
• An invitation for views on a new market-based mechanism for low carbon heat
• Proposals to phase out the installation of fossil fuel heating systems off the gas grid
• A call for evidence on greenhouse gas removal methods
• A Net Zero Research and Innovation Framework
• Frameworks to enable short-term deployment of bioenergy with carbon capture and storage in the power sector (power-BECCS)

Responding to the net zero strategy, shadow business secretary Ed Miliband welcomed its publication but told the House of Commons that it “falls short on delivery”.

“While there is modest short-term investment, there is nothing like the commitment we believe is required.”