Last Monday, the IPCC published its assessment of the need to limit global temperature rises to 1.5oC. It is depressing, but required reading. The authors set out starkly that failing to limit emissions and temperature increases will have permanent and devasting impacts on a wide range of ecologies and societies around the world. It is absolutely clear that we, as a global community, need to cut our greenhouse gas emissions and be carbon neutral by the middle of this century.
For electricity, this means eliminating coal from the energy mix and generating 80% of our electricity from renewables by 2050, even while demand rises due to the growth of electric vehicles and rising living standards in developing nations. This seems daunting, but I am confident that the decarbonisation of our energy system offers industrial opportunity, growth and prosperity, if we act now.
I am optimistic because the old assumptions about how the energy system works are no longer true. I attended the Conservative party conference once again this year. In between catching up with old friends at the Hyatt, and attending receptions that I had been invited to, and a few I hadn’t, I did manage to get to a few fringes. One of those was entitled “Transcending the trilemma”. It looked at the idea that the three central objectives in the energy system – cost, carbon and security of supply - are in competition: that clean energy is more expensive, or that a more secure system has more emissions. It was an interesting debate, but the tense was wrong: we have already transcended the trilemma, and new opportunities are open to us.
Oil prices are now at their highest since 2014. This feeds through to gas, and ultimately electricity prices. Average daily spot prices in the UK’s electricity market have been over £60/MWh (6p/kWh), and regularly more than £80/MWh in recent weeks. Compare this cost to the most recent auctions for offshore wind, at which new generation was secured at £57.50/MWh (2012 prices) and onshore generation in Germany at less than £40/MWh. Wind is now the cheapest form of new generation available and building more will bring bills down. In Africa, microgrids combining solar and batteries are the quickest and cheapest way of providing power to the world’s poorest people. Low carbon is synonymous with low cost.
When the IPCC report was published on Monday, wind was generating 30% of the UK’s power. You may have noticed that the lights did not go out on Monday; there were no power cuts. Or maybe you didn’t, because it is what you expect from a modern energy system. Indeed, the UK has one of the most stable grids in the world – other countries look to the UK to see how to successfully integrate renewables into the system. We are doing this through developing new markets which are creating a flexible energy system. The falling costs of batteries are driving the growth of large-scale electricity storage. Ever more sophisticated use of data and software, combined with increasing digitisation, is allowing us to manage both the demand and supply sides of the system more effectively. Innovation means that security of supply no longer relies on firing up the gas plants.
And this gives me hope, despite the IPCCs’ depressing assessment. I strongly believe in the power of both human ingenuity and the market, but helped by a clear direction set by government. Here in the UK we have among the highest renewable energy mixes in the world – 30% last year, up from 7% in 2010. This is a trend that can and will need to continue. Competitive auctions for new power contracts have delivered the UK’s world-leading offshore industry, and the sector has the ambition to quadruple deployment by 2030. But we need more onshore wind, marine and solar in the mix, combined with an ever smarter and more flexible system. We have the technologies and skills, but these can only deliver with a long-term energy policy that supports competitive markets for renewable technologies and new smart energy services.
A robust domestic energy policy presents further opportunities, especially as we look to global markets following Brexit. In China, the reliance on coal means that the number one cause of civil unrest is pollution. They are all too aware that they urgently need to decarbonise their electricity generation. Next week I am joining a delegation of around 20 small and medium British businesses in the offshore wind industry to China. The UK’s expertise in subsea surveying, cable laying and crew transfer is something that the Chinese desperately need if they are going to succeed in their ambition to become an economy based on low carbon generation.
The IPCC report gave a dire assessment of the future of our environment if we continue along our current path. We need urgent action across the global economy to cut emissions. This action will need investment from businesses, government and individuals. However, this also means the creation of markets for new and ground-breaking technologies. An outward looking nation, that has a history of innovation, industrial strength and entrepreneurial spirit, as well as possessing the technologies that the world needs, should not see this as a challenge, but an opportunity. We must grasp it.
Barney Wharton is Head of Policy at RenewableUK; a Conservative Environment Network Ambassador and a member of the Cities of London and Westminster Conservative Party.