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Decentralise, decarbonise, devolve: the future of energy

  • 9 months ago (2019-01-04)
  • Junior Isles
Distribution 46 Renewables 628
Paul Dight Addleshaw Goddard

By Paul Dight, energy partner at Addleshaw Goddard

The energy sector is changing – with numerous factors reshaping an industry that must adapt to rising demand for renewable energy.

Over recent years, we have seen an increasing volume of energy and renewable energy generated by decentralised power plants. It’s a development that has put pressure on the UK’s energy networks.  That trend will continue – and the pressure is unlikely to ease off as Britain moves towards widespread adoption of electric vehicles. In fact, as petrol and diesel vehicles are phased out, the infrastructure required for an electrical future will add further pressure to the grid.

In the midst of these developments, we see an increasing number of innovators entering the sector. Whether it is the application of blockchain or increasing investment in remote battery storage, disruption is rife across the energy industry. This state of flux renders the act of predicting the industry’s future precarious. Yet, while we may not be able to predict the minutia of the detail, we can say this – decentralisation, decarbonisation and devolution are set to dominate the future of the industry.

Decentralisation and devolved decisions

The direction of travel towards a renewable future is well established and decentralised renewables account for an increasing proportion of energy generation. However, a growing development in this space is the increasing popularity of off-grid power and heat networks – where generation and increasingly storage take place in localised networks ‘off-grid’.

It’s an approach that is attracting interest in the face of concerns over costs, uncertainty and security of supply.  Producing your own heat or power is often not the simplest option. So the extent to which this is taken up will depend on the support it receives from local authorities and the appetite for developers to incorporate it into their schemes. Devolved decisions taken at a local level on planning permission are set to have a big impact on the future of the UK’s energy industry. This is already something we have started to see, with local authorities using their powers to mandate targets for renewable and sustainable energy generation.

The London Plan, for example, has an expectation that 25 per cent of the heat and power used in London will be generated through localised, decentralised energy systems by 2025. In this context, it expects boroughs to develop proposals to establish decentralised energy networks. Developers are also expected to prioritise connection to existing or planned local networks where possible.

In the future, we are likely to see local authorities taking an increasingly prominent role in developing district energy schemes. We may also see them bringing forward city-wide schemes in partnership with district energy scheme developers, operators and other stakeholders. And these networks won’t only be providing power – they will be providing heat too.

Decarbonisation of heat – the energy sector’s next frontier

While significant advances have been made to help decarbonise power generation, the next big challenge for the sector is to decarbonise the generation of heat. Currently, heating from homes and businesses accounts for 32 per cent of UK emissions. 70 per cent of heat energy supply comes from natural gas [i] . Clearly, there is progress to be made if the UK government is to meet its legally binding fourth and fifth carbon budgets. As such, beginning to reduce carbon emissions associated with heat generation, with the ultimate goal of decarbonising heat generation completely, is of fundamental importance to the sector.

This is not an insignificant challenge, since heat is the slowest and most challenging sector to decarbonise.  Heat is heavily reliant on natural gas. Whilst it is still a fossil fuel, it is cleaner than coal and so the benefits of decarbonisation versus the costs involved are less stark.

Current trends towards localised energy networks will have an important part to play as we move towards the decarbonisation of heat. The Government believes heat networks could meet up to seven per cent of heat demand in homes and up to 24 per cent of heat demand in industrial and public-sector buildings by 2050 [ii] . Although challenges to delivering localised heat networks do exist, we have seen a willingness from both local authorities and developers to consider them. The green credentials associated with these schemes, such as the achievement of environmental standards including BREEAM and LEED, are an important aspect of this as businesses look to position themselves as environmentally conscious.

These advancements will, however, need to be complemented by a large-scale solution for ‘green heating’. The pathway for this has not yet been laid out by the government – but clarifying the preferred approach in the relatively near term is important if the is to meet its binding carbon reduction targets.

At present it appears that the two most viable options for widespread decarbonisation are through electrification or hydrogen. The electrification option would see electric heat pumps replacing gas boilers across the country. Questions remain over the additional demand this would place on the grid, although the potential for smart heating controls could help address peaks in demand.

Alternatively; using hydrogen generated by electrolysis, or alternatively through steam methane reforming with carbon capture and storage, is challenging too. It would necessitate replacing or adapting boilers and cookers in every home and business – and there is also work to be done to convince the public that hydrogen is safe.

It’s clear, therefore, that there are significant hurdles to overcome before we see real progress being made towards the decarbonisation of heat.  The government has a key role to play in setting out a pathway towards the decarbonisation of heat – and funding will also prove to be an important enabler.

Nevertheless, the innovation we see taking hold in the industry will help ensure progress continues to be made in both heat and power generation. As we move into 2019 we can expect more decentralisation, more devolution and more progress towards those goals.

[i] Addleshaw Goddard Energy Disruption Report 2018

[ii] Addleshaw Goddard Energy Disruption Report 2018