The Sixth Carbon Budget – making a future decarbonised system a reality

Ervin Duva, Senior Financial & Commercial Analyst examines the UK Government’s recent policies aimed at achieving net zero by 2050 and how we can make a future decarbonised system a reality.

The pandemic has brought the climate emergency into sharper focus than ever before. It has demonstrated the urgency to mitigate the negative effects of climate change around the world. In the year of COP26, it has been encouraging to see a raft of recent policy announcements from Government supporting decarbonisation and the promotion of renewable energy. The Government’s 10-point plan, the Energy White Paper and the Sixth Carbon Budget, all aim to help achieve net zero on an economy-wide basis by 2050 and we expect further policy development throughout 2021.

The Climate Change Committee has recently published its advice on the Sixth Carbon Budget, which will run from 2033 to 2037, recommending that the budget be set at 965m tonnes of CO₂ equivalent (MtCO₂e) equating to, on average, 193MtCO₂e annually. With, annual emissions in 2019 at 522MtCO₂e there is an impetus to go faster and further as we set the trajectory for net zero.

In order to achieve the level of decarbonisation required, both renewable deployment (supply) and electricity uptake (demand) are expected to increase substantially. According to the budget, by 2030 solar capacity in the system will need to treble and onshore wind capacity double. Flexibility will also play a key role in accommodating further renewables in the system, with the operational storage capacity expected to reach 5-9 GW by 2030.

The government is already responding to this. For instance, we’ve seen the introduction of the Net Zero Hydrogen Fund by the Department for Business, Energy and Industrial Strategy (BEIS), new system services announced by the National Grid Electricity System Operator (NGESO) and the inclusion of solar and onshore wind in the upcoming CfD AR4 – all setting the scene for what is to come.

The government has also opened discussions on topics such as hybrid and flexible systems, the future form of the CfD, electricity market design and the development of renewable hydrogen. In response to this RES has been proactively engaging at all levels with Government, NGESO and trade bodies such as RenewableUK and Energy UK to help promote the interests of our clients and the solar/onshore wind industry in general. We have emphasised the important role that flexibility and electrification must play in achieving net zero at the least possible cost to consumers and we continue to engage with our partners RenewableUK and Energy UK to lobby in favour of renewable hydrogen deployment.

Reaching net zero will require full decarbonisation of electricity, alongside the electrification of heat and transport. Renewable-based electrification is the fastest and most efficient way to reach net zero. Electrification isn’t the answer for all our sectors but renewable (green) hydrogen is the missing link to support those hard to abate sectors such as agriculture, heavy transport and certain industrial processes, thus enabling full decarbonisation. It’s widely acknowledged that renewable hydrogen can be competitive or even cheaper than hydrogen produced from fossil fuels within the next decade. In our European markets we are seeing a greater focus on support for green hydrogen, which is really encouraging, not least as it represents more demand for clean, green electricity from renewables. In Sweden, the HYBRIT (Hydrogen Breakthrough Ironmaking Technology) project aims to decarbonise the steel industry by replacing the coking coal with hydrogen made from fossil-free electricity (primarily wind power) and water. Recently in Germany we have seen further pilot projects too through the Wind Hydrogen Salzgitter – WindH2. RES is therefore lobbying for a CAPEX support mechanism for electrolyser projects and is working with RenewableUK to push for a green H2 CfD scheme. With the appropriate strategies and incentives for renewable hydrogen, heat pumps and Electric Vehicles (EVs) it will be possible to achieve the ambitious targets that have been set.

RES believes in a future where everyone has access to affordable zero carbon energy. System-wide electrification, renewable hydrogen and flexibility will enable a full shift to a green economy by 2050 with low cost wind and solar at the heart of this transition.