Committee on Climate Change

Over the next decade and in the 2020s, significant investment is required in low-carbon ways of generating electricity, that is in renewables, Carbon Capture and Storage (CCS) and nuclear. Under the scenario set out by the Committee, emissions fall by around 40% from current levels by 2020 and around 90% by 2030 and emissions intensity falls by similar proportions.

The Committee will assess the Government’s progress towards reducing emissions by 2022 in the power sector by looking at a set of key power indicators. These are outlined in brief below:

• Wind is the only low-carbon technology that is ready for deployment now – 23GW of new wind capacity is required between 2009 and 2020.
• Nuclear is a cost-effective form of low-carbon generation and early entry into the mix will contain the costs of decarbonisation through the 2020s and beyond – up to  three new nuclear plants will be required by 2022.
• CCS should make an important contribution to long-term power sector decarbonisation, both in the UK and internationally – up to 4 CCS demonstration plants will be required by 2020.

The power sector is included within the EU Emissions Trading Scheme (EU ETS). The EU ETS places a cap on the emissions that can be produced by the sector up to 2020, and thus should deliver the emissions reductions required in the sector to 2020. However, it will not automatically bring forward the low-carbon investment to deliver required emissions cuts in the 2020s and beyond. This is because the cap could be met to 2020 through a shift from coal-fired to gas-fired generation, rather than any new investment in low-carbon plant. Beyond 2020, the level of the cap is uncertain, and thus there is no strong long-term signal to investors. 

The risk that the EU ETS will not deliver low-carbon investment is of concern because failure to invest in low-carbon generation now would make it much more difficult and costly to reduce emissions beyond 2020. In order to ensure that the UK meets its climate change commitments and has security of energy supply for the future, it is therefore necessary to look forward to likely low-carbon power requirements in the 2020s, and to put domestic energy policy in place now which could meet these.

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Our Fourth Budget Report sets out that addition of 30-40GW low-carbon capacity through the 2020s is feasible, desirable and cost effective. This would result in a reduction in carbon intensity from around 300 gCO₂ / kWh in 2020 to around 50 gCO₂ / kWh in 2030. We expect a significant demand increase from 2020 to 2030, reflecting increased uptake of electric vehicles and heat.

There is a range of low-carbon technologies – nuclear, CCS and some renewables- that are likely to be cost effective and deliverable at scale in the 2020s:

• Significant investments in onshore and offshore wind are expected over the next decade with scope for increased investment during the 2020s depending on relative cost and build constraints for other technologies.
• Nuclear could be added to the system from 2018, with scope for large-scale investment from the early 2020s.
• Given demonstration of CCS in the mid 2010s, this technology could be rolled out on existing and new fossil fuel plant starting in the first half of the 2020s, with scope for investment in other renewables  such as marine and geothermal generation also from this time

We also anticipate investments in smart meters and increased interconnection with Europe to provide greater system flexibility, therefore addressing problems associated with the intermittency of some renewable generation.
 


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Market reforms are required in order to deliver these low-carbon investments.  We have set out in our Fourth Budget Report the need for competitively tendered long term contracts for low-carbon generation in the 2020s.  Such a mechanism could allocate risks appropriately between the public and private sectors while providing the discipline of price competition.  Long term contracts would also provide the greatest confidence that required low-carbon investments are delivered at least-cost to the electricity consumer.