By David Sheridan
On 22nd October, the Green Angel Syndicate Insights programme was delighted to welcome John Nangle, Energy Lead in the Cabinet Office, to a virtual fireside chat with GAS CEO, Nick Lyth. An audience of over 50 members and guests were treated to an insight into the complexities of the politically and economically nuanced world of UK government energy policy.
John opened by outlining the macro energy position that the UK, indeed the world, is dealing with. In numbers the task of decarbonising our energy demands is, indeed, daunting. Current global energy demand is about 70,000 terra watt hours per year (TWh/y) rising to a predicted 120,000 TWh/y by 2050 if the global economy continues on current trends. In carbon terms this equates to 40bn tonnes per year (t/y) of CO2 rising to 80bn t/y in 2050. In the UK, with electricity approximately 4x more expensive than gas (excluding subsidies), the challenge to decarbonise is economically and politically challenging and will require a multi-strategy approach. Any tax on carbon (notably gas), a theme revisited a number of times in an engaging Q&A session, is effectively a tax on the poorer members of society whilst subsidies on renewable energy is a drain on revenue.
Interventions are therefore needed in equal measure across a range of options if the UK is to reach net zero by 2050. John identified six core interventions:
The conversation then moved on to discuss specific policy challenges in the UK. John tackled this wide-ranging question with interlinked themes of time-based pricing, subsidy issues, carbon tax and the fiscal challenge of the move to EV’s.
The government is looking to tackle the lack of time-based pricing in the energy sector but John stressed that for this to work, the end user must help balance the demand by changing how and when they consume and store energy. He believes that innovation has a major role to play and there are substantial government incentives to support this which is all good news for Green Angel Syndicate. Not such good news, however, is John’s concern that innovation is being slowed down by Ofgem and political influence whose short-term priorities, understandably, focus on the plight of the poor who will be the hardest hit by higher energy pricing. Smart Meter programs have also been severely delayed which in turn has delayed the impact of innovation in the deployment of storage and demand-side management.
John also talked about the gas versus electricity subsidy problem. Petrol and diesel, which are heavily taxed, contribute about £34bn to the national purse which the government currently can’t do without. Whereas gas is effectively subsidised due to there being no carbon tax, electricity prices include 4p/kwh related to historical renewable subsidies.
The Zero Carbon Commission has recommended a minimum price of £75 /tCO2 by 2030 (which is consistent with international comparisons of $75-100 t/CO2) but implementing such a policy remains some way off.
When pressed on the actual UK programmes currently in play, John offered a strong defence of government policy, stating that a great deal is being done and backed this with the following examples of existing energy efficiency schemes:
John praised the support being given to renewables and in particular the offshore wind industry. A target of 40GW capacity from renewables by the end of this decade is ambitious and encouraging. He also talked about the considerable support being given to the UK nuclear industry which, he reminded his audience, accounted for 17% of electricity generation in 2019 but is in need of updating as much of the infrastructure is nearing retirement. The future of both Hydrogen and Carbon Capture as tools to help reach net zero are less promising.
On innovation in general, John made the interesting observation that the difficulty has not been in innovation itself but in the move from the laboratory and trials to implementation at a scale needed to make a measurable difference.
Challenged by Nick Lyth on whether the UK can hit its ambitious targets, John was cautious. Globally, there is both a resource and skills shortage and the UK is no exception. John cited the positive moves being made by the Ministry of Defence with a massive carbon offsetting programme to compensate for the huge and currently unavoidable emissions made by fighter planes, warships et al. But he countered that all government departments needed to step up.
The evening ended with a lively Q&A session with questions from a well informed audience covering a wide range of topics including tidal and wave power, the Brexit effect, energy lobbyists, exporting UK expertise via the foreign office, social housing, carbon tax, storage (‘fundamental if time-based pricing is to work’ says John) and nature based solutions.
To view the full unedited recording including John’s answers to all Nick Lyth’s and the audience’s questions please click this link.