Kernel Monolitico

The challenge to decarbonise the UK economy, and to keep it on track to the 2050 emission reduction target, is highly dependent on the speed at which emissions are reduced in the electricity supply sector. The timely development and deployment of low- carbon energy technologies in the generation mix is fundamentally important if a cost- effective decarbonisation process is to be achieved in the power sector and in other sectors of the economy. The cost of developing a low-carbon electricity sector is influenced by a wide range of factors, but continuity in the energy policy framework is essentially vital in attracting investors as well as de-risking investments in the energy sector. The lack of coherence, stability and clarity in any energy policy framework seeking to balance the challenges of sustainability, security and affordability has a potential to increase the cost of attaining these policy priorities. As the timelines for achieving the deployment of essential low-carbon energy technologies, electricity supply sector decarbonisation targets and the carbon budgets by 2030 are set to be missed by a wider margin, a revised energy policy strategy to steer the UK economy, and indeed the electricity supply sector back on track to the 2050 emission reduction target could have huge economic implications.

An accelerated low-carbon energy technology transition from 2030 to 2050 could culminate in the installed generation portfolio shown in Figure 4.7 with the capability to align with the carbon budgets and the 80 % emission reduction target by 2050. Since the results of the electricity generation infrastructure evolution by 2050 depicted in Figure

4.7 is a product of a delayed and fast tracked decarbonisation process, the low-carbon investment implications are assessed in the context of the total capital investment outlined in Figure 4.9. Before the UK government revised its energy policy framework, it was suggested that an estimated £200 billion investment was required to deploy 45 GW of low-carbon energy capacity between 2014 to 2030 to achieve a carbon intensity of 50 gCO2/kWh by 2030 (CCC, 2013a). A policy departure from the target of decarbonising

the electricity supply sector from 2014 to 2030, to one seeking to pursue an accelerated alternative to achieve a near zero grid carbon intensity by 2050 would require an investment outlay of £237 billion for the generation portfolio assembled in Figure 4.7. Through this radical emission reduction campaign after 2030, investment in conventional large-scale nuclear reactors could potentially reach £56 billion for the estimated 19 GW deployable capacity by 2050. Similarly, a total rollout of 19 GW of SMR could be achieved through an investment portfolio of £73 billion taking the total nuclear power investment to £130 as shown in Figure 4.9.

Figure 4.9. The low-carbon and renewable energy investment portfolio for an accelerated electricity supply sector decarbonisation from 2030 to 2050.

A delay in the deployment of CCS in the electricity generation beyond 2030 is estimated to have the potential to increase the cost of carbon abatement to the UK economy. There are suggestions that stronger and comprehensive regulatory frameworks and schemes, such as the a carbon price should be sufficient to incentivise and accelerate CCS deployment in the power sector (Lipponen et al., 2011). According to the analysis performed by the ETI, a delay in CCS development and deployment could increase the

longer term decarbonisation cost by about £4-5 billion per year, especially if CCS is rolled out after the 2030s (Clarke, 2016). The CCS installed capacity outlay projected in Figure 4.7 could require a total of £33 billion reflecting all retrofitted applications on gas and biomass plants (see Figure 4.9). The rapid development of the renewable energy sources, particularly offshore is critically important in contributing towards a rapid decline in emissions in the period to 2050.

Based on the simulations undertaken to develop scenarios for this thesis, the rapid development of offshore wind could trigger a fall in the deployment cost to £78/MWh by 2050, making it significantly cost competitive among mature renewable energy technologies at the CfD auctions. The decline in the industrial costs for offshore wind projected in 2050 is in line with the high offshore wind scenario which predicts a fall in costs to around £95/MWh through the 2020s based on the central demand and a decarbonisation assumption of 100 gCO2/kWh by 2030 (HM Government, 2013b). Based

on this indicative LCOE trajectory of £78/MWh, the deployment outlay for offshore wind (see Figure 4.7) could amount to £23 billion, and thus taking the total renewable technology capital input resource to about £74 billion as shown in Figure 4.9. Developments in onshore wind and solar are slightly constrained in this scenario, and thus their capital costs respectively amount to 8 and 11% of the overall renewable energy capital investment compared to 32 % for offshore wind.

4.3

Summary

The UK requires a balanced energy policy framework that meets security of supply and environmental sustainability particularly in the period to 2030. The imminent closure of coal and aging nuclear power plants through the 2020s could potentially create a supply gap of 45–55 % (Institution of Mechanical Engineers, 2016). The new UK energy policy (DECC, 2015a) which is set to be driven by gas and nuclear power plants may not achieve the deployment targets anticipated to meet security of supply and decarbonisation objectives. The potential failure by the new UK energy policy to address the capacity crunch through the 2020s could prolong coal generation in the mix beyond the 2025 phase-out date (DECC, 2015a). This could compromise on the decarbonisation agenda especially in the absence of CCS in the generation mix.

The scenarios developed in this research show that the new UK energy policy may not achieve the 4th and 5th carbon budget requirements (CCC, 2013a; CCC, 2015). An alternative scenario which retains coal and diesel generators could meet the electricity demand at the expense of 81.4 MtCO2 cumulative emissions by 2030. Therefore, the UK

new energy policy would need to be revised in order to reconnect with the ethos of the Climate Change Act which seeks to build a strong link between security of supply and a low-carbon electricity supply system. A revised energy policy framework which promotes an accelerated deployment of CCS, conventional and SMR nuclear plants and renewable energy technologies after 2030 could assist in developing a near zero carbon grid intensity electricity generation sector by 2050. This twenty year decarbonisation campaign could be achieved through a £237 billion investment.

Chapter 5

The UK Shale gas development and its implications