Three priorities for a green recovery in the utilities sector

• 4 years ago (2020-07-10)
• Junior Isles

Renewables 776

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By David Hall , Power Systems VP UK & Ireland at Schneider Electric

The past few months have been a test of the resiliency and agility of the UK grid and energy supply chain at large. National Grid has already predicted a £500 million cost for the power reliability measures it has taken in the past few months in response to disruptive factors including negative wholesale prices, the switch-off of surplus power generators, and a slump in energy demand – amongst many other complicated factors.

But many companies are already looking ahead to build a greener future for the global energy industry. They have the ambition, the technologies and the skills to build a healthier, more resilient, net-zero-emissions economy that drives sustainable economic prosperity. The utilities industry has a vital role to play, so here are three priorities for a green economic recovery for the energy industry to consider:

Unleash massive investment in renewable power systems

Investment in clean power systems constitutes the single biggest investment opportunity of the next decade. A massive wave of investments in renewable electricity generation, storage and power grids is essential to decarbonise existing supply and meet growing electricity demand from rapid electrification of buildings, transport and industry. The ETC forecasts a 4 to 5-fold multiplication of electricity demand globally by 2050. This would require a growth in new wind and solar capacity from 160 GW installed in 2019 to 1500 GW installed per year on average over the next 30 years, along with substantial investment in grid infrastructure.

History has shown that making clean energy a priority in stimulus packages can be a key driver of job creation and encourage industry investment in the following years. A recent analysis from IRENA indicates that more than 17 million jobs could be created in the renewable energy sector globally by 2030, doubling the size of the workforce in the sector. The expansion of renewable power systems can also in time contribute to economic recovery, by driving down energy prices for businesses and consumers alike.

Today, despite the recent fall in fossil fuels prices, renewable power is largely cheaper than fossil fuels power generation across major global markets – justifying the costs of building more flexibility into the grid to handle fluctuations in supply and demand. In a challenging economic period, businesses and households alike could benefit from lower energy bills underpinned by an expansion of renewable generation.

Support the adoption of EVs and get over ‘peak oil’

As we carve out the road to recovery, scrapping polluting petrol and diesel cars in favour of EVs could be a key method to stimulate the economy. EVs are already becoming increasingly affordable to UK buyers, but could benefit from additional financial incentives to push them over the ‘tipping point’. To be prepared for a ban on combustion cars to be introduced as planned in 2035, it is vital for EVs to become the dominant purchase option during the next ten years.  Although there is debate over how our use of public transport and individual transport will change in the immediate future (especially in dense urban centres) the decarbonisation of this transport is vital.

Last year, the rise of electric mobility was already making peak oil in the late 2020s probable, and cheap renewables were squeezing coal generation out of the power market. As the world progresses towards a lower-carbon economy, demand for fossil fuels is likely to shrink. In light of these long-term trends, leading fossil fuels players are preparing with plans to reduce their climate impact, such as reducing emissions of upstream operations or the carbon-intensity of the fuels they produce. At the same time, many are also exploring new low-carbon growth areas like bioenergy and hydrogen.

At the same time, the industry must anticipate a decline in economic support for carbon-intensive operations. For major economies, especially net energy importers, low fossil fuel prices are an opportunity to remove remaining fossil fuels consumption subsidies and to increase fossil fuel taxes. Economic cash injections could usefully be invested in an early phase-out of the least competitive assets, the diversification of operations, and helping workers and local communities successfully navigate the transition.

Supporting low-carbon activities and innovation

The development of new technologies and business models is a major driver of economic growth. While supporting existing employers in the energy industry, stimulus packages should also support the creation and implementation of new solutions that are both sustainable and might offer the UK a competitive advantage in the global marketplace. Many new emerging technologies in our industry fit the bill: zero-carbon hydrogen production, low-carbon fuels and electric charging options for the shipping industry, digital solutions for system and energy efficiency, to name but a few.

Governments can support the development of these new economic sectors at relatively low cost, as the scale of investments required in these activities is much lower than in national power infrastructure and construction. What matters in these emerging economic sectors is to accelerate technology deployment to unlock learning curve and economies of scale effects, which will enhance their cost-competitiveness. Secure sources of financial support from the government would allow innovative new businesses to negate the rise in cost of capital for early deployment projects, as can often happen in a climate of future market uncertainty, especially with technologies not yet established in the market.