Energy Report 2022
Energy mix
What is the right energy mix?
The current energy crisis is a reminder of the issues created by an over-reliance on imported energy and a lack of storage.
Analysis from the International Monetary Fund (IMF) has found the energy crisis is impacting UK household budgets harder than any country in western Europe due to the dependence on gas to heat homes and produce electricity.
Think tank, Ember, found that the UK produced more electricity from gas than any other European country, except Italy. And the climate think tank, E3G, found that the UK also has the least energy-efficient homes in western Europe.
The government previously set out ambitious plans to reach net zero emissions in the UK by 2050, aiming for mainly decarbonised power generation once the 2030s are reached.
Renewables such as wind, solar and hydropower will play a key role in the energy mix, according to our survey respondents.
The intermittent nature of renewables means that energy storage will play a crucial role in the transition to domestically produced, clean, renewable energy — allowing energy to be stored for longer, to manage electricity generation variations and increase resilience.
Earlier in the year, the government awarded nearly £7 million of funding for projects developing innovative energy storage technologies as part of the Longer Duration Energy Storage competition, which is worth £68 million in total. There were 24 projects selected in the first round, ranging from the development of thermal batteries and the conversion of energy to hydrogen.
Alongside renewables, we will also need gas with carbon capture, usage and storage (CCUS) and nuclear power as part of the energy mix to keep electricity prices low and to meet demand.
How has the Russia-Ukraine war affected fossil fuel use?
There is mixed opinion whether the Russia-Ukraine war has accelerated or slowed the global transition away from fossil fuels.
Many governments have committed to accelerating renewables, recognising that they are currently significantly cheaper than wholesale prices, which are driven by fossil fuel prices.
The European Commission presented the REPowerEU plan to save energy, produce clean energy and diversify energy supplies in response to the global energy market disruption caused by Russia’s invasion of Ukraine.
Ending the EU’s reliance on Russian fossil fuels will require a massive scale-up of renewables, along with the faster electrification and replacement of fossil-based heat and fuel in industry, buildings and the transport sector.
The European Commission is proposing to increase the EU’s 2030 target for renewables from the current 40% to 45%, supporting this with new legislation and recommendations for faster permitting of renewables, especially in dedicated ‘go-to areas’ with low environmental risk.
Ursula von der Leyen recently identified that “renewables are really our energy insurance for the future”.
Newly published research from the University of Oxford, shows that a rapid global shift from fossil fuels to renewable energy by 2050 would save the world at least £10 trillion. The analysis used decades of energy cost data, as well as thousands of scenarios examining the expense of switching to zero carbon power.
The results showed that wind and solar energy, along with battery storage, had become cheaper than originally anticipated because of better technology and economies of scale. On the other hand, fossil fuel prices have fluctuated, driven by global political and economic events.
In conclusion, the study finds that renewables are now often cheaper than fossil fuels — and that cost advantage will accelerate. Rupert Way, the lead author of the research, said, “Accelerating the transition to renewable energy is now the best bet not just for the planet, but for energy costs too”.
However, in the short-term, countries are turning to alternative fossil fuel sources to meet demand.
Talks on the MidCat gas interconnection project between France and Spain have been resurrected. The project was launched in 2013 and was intended to be an energy bridge between the Iberian Peninsula and the rest of Europe. However, it was abandoned in 2019 by the French government, following cost and impact studies.
Construction of the pipeline is fiercely supported by Spain, Portugal and Germany who believe that the interconnection will help to mitigate impacts of the energy crisis, helping diversification of supply.
However, France is concerned about reducing demand for its nuclear energy, as well as the environmental impact and longevity of the pipeline. French president, Emmanuel Macron, raised his point that “all experts tell me that it is wrong to imagine that today’s gas pipeline will transport hydrogen tomorrow”.
Liz Truss has signalled the intention to extract more gas and oil from the North Sea, accelerate the new licensing of North Sea oil and gas fields and lift the moratorium on fracking to try and increase gas production.
Lord Deben, who chairs the Committee on Climate Change, and Sir John Armitt, who chairs the National Infrastructure Commission wrote to the prime minister expressing their concern, saying, “The UK cannot address this crisis solely by increasing its production of natural gas. Great domestic production of fossil fuels may improve energy security, particularly this winter. But our gas reserves — offshore or from shale — are too small to impact meaningfully the prices paid by UK consumers.”
Instead, Lord Deben and Sir Armitt and their respective bodies recommend that the government:
- Develops credible policies to improve energy efficiency in buildings, to reduce the amount of energy wasted and support the necessary transition to low-carbon heat
- Provides and promotes a comprehensive energy advice service
- Delivers a working, market-based mechanism for low-carbon heat, to help achieve the government’s goal of growing the heat pump market
- Makes full use of new auctions for onshore wind and solar
- Updates National Policy Statements for energy and acts quickly to resolve barriers to deployment of strategic energy infrastructure.
New licensing of the North Sea’s oil and gas supplies was announced in the British Energy Security Strategy, with the government arguing that it is not contrary to the UK’s net zero commitment but necessary for a stable transition.
The strategy outlined plans for up to 95% of the UK’s electricity to come from low-carbon sources by 2030.
Key points include:
- Constructing as many as eight new nuclear reactors
- Reforming planning laws to speed up approvals for new offshore wind farms
- Doubling targets for hydrogen production to help provide cleaner energy for industry
- Considering reforming rules for installing solar panels on domestic and commercial buildings to increase solar capacity
- Introducing a £30 million “heat pump investment accelerator competition” to make heat pumps and, in turn, reduce demand for gas.
In considering the drive to clean energy, it is important to look at the carbon emissions involved with development of solutions.
Some experts believe that the cost of developing additional fossil fuel capacity has increased financially, as well as environmentally, due to ESG (environmental, social and governance) expectations.
Myles Allen, Profession of Geosystem Science, University of Oxford, is promoting the target of geological net zero. This involves returning one tonne of carbon dioxide to storage in the Earth’s crust for every tonne generated by any continued burning of fossil fuel. It is seen as a more robust goal than net zero alone, as there is “far less wiggle room for creative accounting of how much forests and other natural carbon sinks can soak up”.
