Eco Innovation

DNV: early decisions needed for UK’s energy transition

23rd February 2024
Kristian McCann

DNV has stressed the importance of the UK Government prioritising long-term policy clarity and consistency to foster an investable environment for energy transition financiers, thereby expediting the shift away from fossil fuels, in its 2024 UK Energy Transition Outlook (ETO) report.

The report reveals that the transition is faltering, with the UK off track to meet its 2050 decarbonisation targets and its 2030 emission reduction commitment under the Paris Agreement.

DNV, serving as an independent energy expert and assurance provider, projects the UK's annual emissions to reach approximately 125 million tonnes of CO2 equivalent (MtCO2e) by 2050. This figure represents a significant 85% reduction from 1990 levels but falls short of the 100% reduction target set for mid-century.

The report suggests that with appropriate incentives, the acceleration of the transition could be realised through rapid deployment of technologies like wind, solar PV, smart grids, electric vehicles, as well as carbon capture storage (CCS) and hydrogen.

Specifically, the UK hydrogen market requires considerable support, with projections indicating that by 2030, hydrogen production will attain 1Mtonnes/yr, of which only 60% will be low carbon, equating to approximately 5GW of low carbon hydrogen against a governmental target of 10GW.

Hari Vamadevan, Executive Vice President and Regional Director, UK & Ireland, Energy Systems at DNV, remarked: "The evidence in our 2024 UK ETO is clear – without immediate action, the UK will not only fail to fulfil its climate commitments but also lag in the global race to decarbonise, missing out on the benefits that a shift to a low-carbon system would entail. However, with the right policy mechanisms in place, there is still an opportunity for both industry and government to realise a transition beneficial for business, consumers, and the planet."

DNV advocates for a 'whole systems' thinking approach from the UK Government to address all dimensions of the energy transition, thereby overcoming system inertia.

The report calls for policymakers to offer clear incentives to attract private capital for green generation expansion and to facilitate planning and permitting for the development of critical infrastructure. It also highlights the need for comprehensive societal engagement to integrate low carbon solutions and ensure a fair transition by minimising adverse social impacts.

DNV forecasts an increase in annual energy infrastructure CAPEX from an average of £26 billion in previous decades to approximately £38 billion over the next 30 years. Despite this substantial rise, the proportion of GDP allocated to energy CAPEX is expected to remain relatively stable at just above 1% of GDP from 2000 to 2050.

The transition promises significant benefits for British households, with an almost 40% reduction in energy costs by 2050 compared to 2021 prices. DNV concludes that the UK's economy decarbonisation is affordable, offering substantial benefits to households through cleaner, more efficient, and less expensive energy.

Currently, nearly 80% of the UK's primary energy originates from fossil fuels, with renewables (13%) and nuclear energy (7%) making up the remainder. Despite anticipated renewable energy expansion, the dependency on fossil fuels will persist over the next decade, reducing only to 70% by 2031.

By 2050, the energy landscape will dramatically transform, with low-carbon sources fulfilling nearly 65% of the UK's energy needs, predominantly through renewables like wind and solar, alongside contributions from bioenergy and nuclear power.

This shift necessitates a significant change in historical electrical grid investment levels to ensure the grid facilitates rather than hinders the energy transition. Policymakers and regulators must recognise the distinct risk profiles associated with this transformative change.

Hari Vamadevan added: "The climate objectives and decarbonisation targets are established, yet it is incumbent upon the UK Government to implement a clear and ambitious strategy to actualise these goals. The UK urgently requires a detailed transition roadmap to navigate its journey towards a future low-carbon energy system, enabling businesses to invest confidently in driving the energy transition. The UK Government has long proclaimed its leadership in the global net-zero transition; it is now time to fulfil those claims. The responsibility rests with policymakers."

Energy leaders, government officials, and representatives from various trade bodies will convene in London for the launch of the 2024 UK ETO. A panel featuring Viken Chinien, VP – Enterprise Risk Management at DNV; Hannah Bronwin, Director of Business Development at SSE Thermal; Owen Bellamy, Team Leader at the Climate Change Committee; Harry Manisty, Investment Director at Octopus Energy Generation; Dean Cooper, Global Energy Lead at WWF; Clara Barby CBE, Senior Partner at Just Climate; moderated by Lucy Siegle, a British journalist and writer on environmental issues, will discuss necessary actions to revitalise the low-carbon transition.

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