Staying optimistic through the decarbonisation transition

While 2022 may have brought little cheer, it is essential that utilities continue to instil optimism in the net-zero journey. Tom Lowe looks back over the past year to identify areas where progress can be built upon and argues that in 2023 a positive message on collectively tackling climate change can help to accelerate the transition.

Changing how we live and reducing our use of fossil fuels will require decades of prolonged effort. We will have successes. We will face setbacks. As the climate evolves, we will see more disruption and dislocation. How do we keep optimistic through the decarbonisation transition? How do we reconcile the disruption already happening with the ongoing need to take action?

As 2023 starts, there is cause for optimism. People are more conscious than ever about the effects of climate change. The hot summer of 2022 was visceral. Technology is evolving and maturing. And governments across Europe are competing to invest in the transition away from fossil fuels. Regulatory frameworks need to evolve quickly to support the transition. And we must stay kind.

Climate change becomes real

The summer of 2022 brought home to many the accelerating risk of climate change. In my home of West Yorkshire, we saw temperatures of 40C for the first time. Native plants wilted. Even relatively modern buildings struggled to stay cool because of their limited energy efficiency. Railways ran slow because the rails were built for cooler temperatures.

At the same time, the UK faced the worst drought since 1976. When the rains eventually came, the baked ground could not absorb the water, leading to flash floods. As Gaia Vince says in her new book Nomad Century, climate is everything.

Beyond the short-term disruption, many people will remember summer of 2022 for the overnight discomfort where the thermostat didn’t fall below 20C. The unnerving sense of stifling stillness on those extremely hot mornings. The silence as the insects and birds conserved their energy.

The case for combating climate change is increasingly visceral.

Progress during 2022

Despite that far from cheery opening, reinventing the energy sector and tackling climate change requires relentless optimism. This can be hard. It requires accepting that disruptive climate change is coming because of emissions we have already released, while pursuing and celebrating progress that is ultimately too small and too late. It also means recognising that progress is still needed to mitigate even more disruption.

Optimism is essential. Climate adaptation must make people’s lives better. That’s the only way to get millions of people to make small and large decisions about their homes and habits. 2022 showed rays of optimism shining through.

Governments across Europe have sought to accelerate the transition to domestic green energy sources to get off Russian gas and oil. In the UK, the government’s ambition on offshore wind has increased to 50GW by 2030. The economics (and tax regime) of solar panels are now irresistible to businesses and those fortunate households with savings. Delivering security of supply increasingly delivers on net zero and enhances affordability.

We have seen system design progress. In January 2022, I wrote in Utility Week that “people will start to get paid for when they use electricity. If they can adjust when they charge their car or heat their home, their energy will cost them less”.

Thanks to extensive work by the National Grid Electricity System Operator (ESO) and others that reality started in November 2022 – demonstrating that systemic change can come at you fast. The demand flexibility service is still in its infancy and there are too many pictures of people sitting in the dark to flex their demand. But household demand – rather than coal or gas back-up generation – is now being paid to balance the grid. That is good for the climate and good for people.

This is only the start. The ESO will work in 2023 to better understand how people are benefiting from the service. The real magic occurs when people agree to automated changes to their heating or electric vehicle charging schedules. Demand side flexibility will quickly progress beyond people changing when they eat their dinner or manually turning off appliances.

After a few false dawns, governments have got the memo on electrifying heat and reducing gas demand. British politicians, including the prime minister and the secretary of state for business & energy, are talking about reducing combi boiler flow temperatures. Well done to the Heating Hub for pushing flow temperatures consistently for the last 18 months.

The government is doubling down on energy efficiency. The launch of the Energy Efficiency Taskforce shows that our buildings are a significant infrastructure problem to tackle and that serious money is required. That requires more than the down payment of £6 billion for 2025 – 2028. And more than extending the Energy Company Obligation (ECO) or introducing ECO+ in April 2023.

As well as reducing heat loss from homes, we need low-carbon heating sources. So it’s a good that decarbonisation of heat has stepped up. The Boiler Upgrade Scheme launched in May 2022, providing grants to cover the higher cost. The government has helped to finance the installation of 1,000s of heat pumps. Every heat pump reduces the use of fossil gas.

Innovation in smart electric heating continues at pace, supported by governments. British companies such as Tepeo are partnering with Ovo and UK Power Networks to trial their smart thermal storage. While Sunamp was awarded £9.25 million by the UK government to develop and deliver its smart thermal store to 100 homes through Project EXTEND. Heat pumps continue to evolve. Ultimately, while government can set the vision and provide the guardrails, it is companies that will develop and deliver the products that people want.

The challenge goes beyond decarbonising heating in homes and we also need to focus small businesses and industrial heat processes, which companies like Caldera are pursuing.

Challenges for 2023

The deep challenges posed by climate change and new technologies require new thinking. There is a sense that deep change to utilities regulation is coming. The regulatory settlement of the 1990s looks increasingly outdated. The problems and available solutions of 2023 are very different to those of 1997. Software and hardware has evolved. Innovation has driven price reductions in technology. And there is so much more data available to people, companies and regulators.

One of the most formidable challenges ahead for utilities is coordinating change. During the 2020s, that coordination might mean joining up electricity network investment with the installation of electric heating technologies or electric vehicle adoption. It might mean working with local councils. It might involve decommissioning parts of the gas grid. With increasingly decentralised technologies such as solar and low carbon heat, it is unclear whether the future entirely lies in centralised decision-making in the south-east of England.

The transition is increasingly local. In West Yorkshire, we’re seeing groups such as Zero Carbon Harrogate and Climate Action Ilkley coordinate change. Local councils will take a much more active role and will listen to local residents and grant (or refuse) planning permission for wind and solar. They will decide how to interpret permitted development rules for heat pumps. They will work with utilities to minimise the disruption of installing new pipes and wires. That means resourcing councils adequately.

During that hot summer of 2022, I asked Bradford Council’s planning department about the permissions required to install air conditioning on a house. They told me I was the first person to ever ask them about residential air con and that the council don’t have a specific policy on it. That’s totally understandable when you look at the Yorkshire climate of the 20th century. In a world of 2C or 3C warming with periods of extreme heat, the sight of air conditioning on Yorkshire homes might become normal.

In the new regulatory settlement, there is still going to be some centralised decision-making. After all, larger companies are more likely to attract foreign capital. And central governments will want confidence that those larger companies are adequately regulated.

As the pressure on households has intensified, regulators have increasingly stepped up. Ofgem published its Net Zero Strategy and is toughening up on financial resilience and has adopted a more agile approach to regulation. Ofwat is forcing water companies to recapitalise and stop using rivers as open sewers. But regulators need to strike a balance and avoid overcorrecting. How do they remain responsive to the changes that are coming, while providing regulatory certainty to those investing in the sector?

We will also need innovative thinking about the relative role of the energy market and the state. For instance, the Energy Systems Catapult has trialled its Warm Home Prescription. This involves GPs prescribing energy to those with certain health conditions. Having a sufficiently warm home provides a health benefit to the individual and is an opportunity for supporting the NHS and social care system.

Be more kind

Being kind is more important this year than ever. While the UK government is providing tens of billions of pounds of help, people are struggling to heat their homes. For those of us working in energy, we have a duty to check on our neighbours and support our communities. Find out if people have lowered their boiler flow temperature or fixed minor draughts. Make sure people have received their Energy Bill Support Scheme payment. Check if people are eligible for government grants or support like ECO.

And if you can afford to, I’d encourage you to donate to the Fuel Bank Foundation or National Energy Action this winter. It is on us to help others to get through these difficult times. That’s the baseline for making homes cosier and greener. We need to maintain that optimism of a better future.

Tom Lowe is an energy consultant working on energy retail and heat decarbonisation. He is also the founding director of trade association Thermal Storage UK