Policy needs to steer the UK towards net zero

Planning consents, decarbonised heat and subsidies for EVs and wind power all need to be rethought if the government is serious about achieving net zero emissions by 2050

At this time of Brexit, there’s not much that unites people. However, there are two things that very many will agree on: first, that a 2050 net zero policy is a good thing; second, that there is a general lack of policy roadmap to get us there.

The government needs to decide on its priorities and make them clear. Current policy is focused on getting costs down, which is the right thing to do, but if it wants to achieve long-term targets to 2050 it would be worthwhile reviewing what would happen to deployment rates if policies were in place that brought project finance banks back into markets where power pricing is already extremely competitive. Policies have been suggested by independent consultants as to how this could be taken forward with little or no subsidy, but Brexit among other things is taking up most government bandwidth at the moment.

Long-term policy is all the more important when you consider the fact that some of our existing onshore renewables capacity will start to reach the end of its natural design life within the relative near term. The process of “repowering”, where turbines or panels are replaced, will begin in earnest for wind farms as we proceed through the 2020s. By 2050 all of our existing capacity will need to have been considered from this perspective.

We therefore need not only policy certainty to provide the platform for what is required here, but a planning system that is ready to handle the repowering that will be required to get us there.

Heat must be less carbon intensive

We remain in a situation where the decarbonisation of heat seriously lags behind the decarbonisation of electricity. The incentives in place to address this simply haven’t had the transformative effect that those in place for electricity have achieved. There are a number of reasons for this, but one of them is that until very recently the Renewable Heat Incentive simply wasn’t structured simply enough to allow third parties to fund improvements on behalf of homeowners and earn a secure return.

A combination of carrot and stick is needed to take things forward. A review of how future subsidies could better target this would be welcome along with continued focus on the regulations incentivising energy efficiency improvements. We need to see valuation differentials for properties that are more energy efficient.

The movement in favour of electric vehicles (EVs) is very encouraging but a lot more needs to be done, and this is perhaps not helped by the reduction of the plug-in grant and reported situations where road tax chargeable on certain luxury diesel SUVs can be lower than those charged on a Tesla Model 3. Long-term road tax exemptions clearly don’t make sense once sufficient volumes of combustion vehicles have been displaced, but to start the EV revolution these sorts of exemptions as well as longer term benefit in kind reliefs on EVs might be worth looking at. Extending the interest-free loan scheme for EVs that is available in Scotland to the rest of the UK, for example, might be worth exploring.

A clearer policy on plans for public charging infrastructure would also be welcome and perhaps help address some of the potential adopters’ range anxiety, though this will become less of an issue as more and more vehicles hit 250-plus miles range.

Solar and wind CfDs

In addition we are in a situation where large-scale solar and onshore wind, the cheapest form of renewable electricity for consumers, is currently excluded from competitive auctions for contracts for difference (CfD) contracts.

This has been done on the basis that government believes these technologies can now deploy without the revenue certainty these contracts provide. While the onshore market is certainly moving forward, it is undeniable that allowing onshore wind to compete in the public CfD auctions would accelerate deployment rates considerably, reopening the door more quickly for project finance debt to be deployed in support of new low-cost development.

This view is shared by many, not least Banks Renewables, which recently launched a legal challenge against onshore wind’s exclusion from the CfD auctions.