10 Energy Things I Like and Don’t Like – 7th August 2024

The opinions presented here are my own and do not reflect the views of Energy Systems Catapult or of any organisation that works with the Catapult.

It's been a year since I started this silly idea for riffling through some of the obvious and less obvious news on the transition to Net Zero, taking a concept used by American sportswriter Zach Lowe. And it’s been quite a month in the British energy sector. Let’s get into it.

1. The new government, picking the low-hanging fruit

The Starmer government has been quick to go after the easy wins in the energy transition – lifting the ban on onshore wind development in England, signing off on three large solar farms (to the fury of NIMBYs), announcing an infrastructure planning bill, as well as following up on the manifesto pledges to establish Great British Energy and the National Wealth Fund. It listened to industry demands and substantially increased the budget for the next renewables Contracts for Difference auction (but not the strike price, which had already been raised under the previous government)

The decisions only get more difficult from here on. Ministers’ in-trays are stacked with requests to use energy consumers as the balance sheet for funding investment in renewables, hydrogen, carbon capture and storage, long-duration energy storage, and more. How they strike the right balance between ambition and discipline will be one of the key tests of the coming months. Chancellor Rachel Reeves’ statement on the current fiscal position highlighted how the desire to get public services back up to standard is colliding head-on with Labour’s promises of fiscal discipline.

A new paper by the Centre for Economic Transition Expertise argues for loosening fiscal rules, specifically for climate-related public expenditure. But it’s fair to ask what make climate change worthy of that exception, but not healthcare, education, public transport, etc.

It’s great that the current administration is unambiguous about the economic benefits of decarbonisation. But anyone who thinks this means that the journey from here on would be a smooth ride might be in for a rude awakening.

2. Heat decarbonisation, erm… heating up

While the government is focused on building large infrastructure, the sector is focusing much of its attention on the on physically smaller but equally important matter of decarbonising homes. It’s been a busy month for grand visions – some more actionable than others, but all valuable in highlighting the need for urgent policy action.

If you read only one of the lengthy heat decarbonisation papers published this month, I’d recommend Public First’s Upgrade: How to deliver better homes by 2030. It’s comprehensive and pragmatic. I might be a little bit biased, because the paper argues for things I strongly believe in. In particular: reforming Energy Performance Certificates so that they're aligned with the outcomes most of interest to property owners, occupiers and policy makers; and using a standardised Local Area Energy Planning approach to strategically plan local decarbonisation.

Nesta published its version of a nationwide heat decarbonisation plan - Delivering clean heat: a policy plan. The paper comprehensively works through some of the biggest challenges that heat policy must address, including: incentives, public awareness, and skills. Its solutions lean a little too far towards central planning, for my liking.

Another think-tank that is considered to be influential with the current government – E3G – has published a report advocating for the government to provide low/zero interest, flexible loans to facilitate investment in home energy efficiency measure.

Meanwhile, in the private sector, Heat Geek has announced a spree of partnerships. These partnerships range from heat pump companies Aira and Hometree, to the biggest energy retailer in the country: Octopus Energy. So while policy must better enable heat decarbonisation, it’s clear that those on the front line are getting on with it regardless.

3. Could imaging help decarbonise buildings?

From the policy to the technical: a trial funded by Innovate UK is using car-mounted thermal imaging cameras to get a picture of the thermal efficiency of buildings – similar to the approach Google Maps uses to map streets. The approach only offers a partial insight into what it would take to decarbonise homes, but it’s a non-invasive way of getting insight into entire streets and neighbourhoods. And it could be complemented with other techniques – perhaps satellite-based thermal imaging – to offer a more comprehensive picture.

It’s somewhat unfortunate that the trial organisations have chosen to introduce another acronym into a sector already overloaded with them. Even worse that they’ve chosen an acronym that’s already used in the sector: BESS (in this case standing for ‘Built Environment Scanning System).

4. Ofgem, emptying the chamber

There was a dizzying sequence of announcements from Ofgem at the back end of July – probably reflecting the fact that the regulator had to hold off on certain publications during the pre-election period. Here I wanted to focus on just two of the consultations that are running over the summer:

Ofgem is proposing a standardised ‘flexibility market asset registration’ – meaning that smaller assets need only to provide their “static” information (technology and capacity indicators, location indicators, etc.) once in order to access multiple sources of value such as national and local flexibility markets. Complementary to that is the concept of a ‘data sharing infrastructure’ – a set of standards, rules and digital transmission capabilities – that would enable key energy information to be sent out and received by any relevant party. Ofgem is consulting on how the development of this data infrastructure should be overseen. Somewhat confusingly, the National Energy System Operator is proposed to act as an “interim” coordinator of the data sharing infrastructure, but isn’t given the role of overseeing the development of flexibility markets – that role has been given to code administrator Elexon.

Notwithstanding, these are important and timely developments from Ofgem. They both build on positions long argued for by Energy Systems Catapult and, indeed, the Catapult has been active in innovation trials for both an automatic asset register and a digital “spine”.

5. Battery learning curves

Technological learning curves are a powerful force – where a technology is characterised by homogeneity and modularity, you get a mutually-reinforcing cycle of exponential growth and cost reduction. Think about any bit of technology in or around your home and how transformative it’s been – the fridge, the car, the mobile phone, etc.

The blogger Auke Hoekstra has done the sums and they look very promising for batteries to be the next technology that transforms our lives in ways currently unimaginable. Having observed a reduction in battery costs from $1,500/kWh in 2008 to less than $100/kWh today – that’s a 93% reduction in costs. Projecting this forward, and checking against the results from another method, he estimates that batteries could cost as little as $8/kWh by 2030. At that price, it’s safe to bet that batteries would become as ubiquitous as those technologies I mentioned earlier.

6. Disappointing reports are like buses…

A report by the National Engineering Policy Centre offered a way forward on rapid decarbonisation of the GB electricity system. The cast of luminary contributors involved has done more for the UK economy than I ever will, so it pains me to say that the report misses the mark more often than it hits it.

Let’s start with the positives: the report is clear that a decarbonised electricity system must be different from today’s, not just bigger. It also cautions against the intense focus on the 2030 clean electricity target undermining actions that would have a beneficial impact in the longer term.

On the other hand, framing electricity decarbonisation as “fundamentally an engineering challenge” seems short-sighted, even accounting for the origin of the report. Stories like this one in The Guardian stress that it would be just as much a public acceptability challenge; not to mention policy, governance, finance, skills, etc. Some of the specific recommendations seem to also misconstrue the nature of the problem. Take, or example, the idea that centrally-planed reinforcements of the onshore transmission network are the answer to interconnectors flowing the wrong way.

I was also looking forward to Regen’s paper on ‘progressive electricity market reform’. I naively expected it to set out a clear proposal for transmission network tariffs that would put an end to 20-plus years of debates on the topic. It did nothing of the sort. The most concrete proposal in the paper is to set up a taskforce to address the issue of interconnectors flowing the wrong way. Maybe this taskforce will read the NEPC paper and recommend building onshore transmission…

7. Microsoft buys DAC carbon credits

The rising energy demand from Artificial Intelligence is a common news story these days. It appears that Microsoft does not think that demand could be fully satisfied by renewables. So it has agreed to essentially fund a direct air capture project by Occidental – one of the largest oil and gas producers in North America.

Technically, Occidental would generate carbon credits through its DAC facility (article behind a paywall). This would appear to be a voluntary form of carbon credits (as opposed to a ‘compliance’ form that operates through an official government-sanctioned market), so it would be interesting to see what verification process is created to give Microsoft assurance that it has funded genuine, permanent carbon removals.

8. Insurance products for smaller hydrogen projects

Hydrogen may be in the “valley of disillusionment” phase of the technology hype cycle, but there are positive signs. Insurance giants Zurich and Aon have partnered to offer a new set of products specifically designed to address the risks for smaller hydrogen projects (<$250m). It’s exactly this type of financial service targeting that’s required to enable meaningful deployment of hydrogen (or, indeed, any emerging technology). The product is mooted to offer a comprehensive set of protections, including for any complementary carbon capture and storage (article behind a paywall).

9. SSEN graduates make the LAEP

Scottish and Southern Electricity Networks (SSEN) has been one of the distribution network operators most active in engaging with and making use of Local Area Energy Plans (LAEPs). In a great new initiative, four individuals will spend part of their SSEN graduate scheme embedded with local authorities to support them developing LAEPs using a spatial planning tool that SSEN has developed. This is creative and very low risk (for SSEN, the councils and for the graduates) way to chip away at local authorities’ lack of capacity and expertise. ?

10. The great gridlock of China

The scale of… everything, really… in China is hard to comprehend. Let’s take the energy transition as a case in point: more wind and solar capacity is being built in China than in the rest of the world combined, and the government has accelerated the construction of nuclear plants.

Investment in the electricity grid also outpaces the whole of Europe (article behind a paywall):

Meanwhile, electricity demand has sky-rocketed, at least in part because the country is increasingly geared towards energy-hungry production.

But despite all of this, the story in China echoes that of Britain, Germany and many other electricity systems: a mismatch between where renewable energy is being produced and where electricity is used, with the grid not able to carry enough of the power to balance the two. China does have the advantage that is still has a way to go to catch up to grid management best practice which is commonplace in those other countries. In the meantime, that astronomical rate of construction will be both a blessing and a curse.

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