UK’s Energy Transition: IEA Review Highlights Progress And Challenges

Carbon, Energy, Hydrogen, Solar

UK’s Energy Transition: IEA Review Highlights Progress And Challenges

In November 2023, the International Energy Agency (IEA) reviewed the United Kingdom’s energy policies as the country updates its strategy to align with industrial and energy security goals. The UK, a pioneer in setting a legally binding net-zero target in 2019, has been proactive with carbon budgets and pricing. The Climate Change Committee, established to track progress, reports that the UK has achieved its first three carbon budgets, reducing greenhouse gas emissions by an estimated 53% compared to 1990 levels in 2023.

The UK’s significant emissions reductions have primarily resulted from decreased coal use and increased renewable electricity generation. The country aims to cut emissions by 68% from 1990 levels by 2030, a target that will require accelerated efforts. To continue making progress, extensive policy support and investment are necessary across different sectors.

While the shift from coal to renewables has significantly lowered electricity system emissions, more focus is needed on end-use sectors like buildings, transport, and industry. The IEA’s review highlights the UK’s leadership in clean energy, especially in offshore wind. The success of the Contracts for Difference scheme has been pivotal in supporting renewable energy deployment. However, to meet future goals, the UK needs to build more low-emission generation capacity, enhance electricity infrastructure, and address administrative barriers.

The UK has set ambitious targets for decarbonizing electricity generation. By 2035, the government aims to expand offshore wind capacity to 50 gigawatts, increase solar capacity to 70 gigawatts, and achieve 24 gigawatts of nuclear power by 2050. Despite the reduction in coal and nuclear power, natural gas use has increased. Renewable sources now make up 42% of the electricity mix. Continuing this transition will be essential to replace unabated gas and accommodate rising electricity demand due to electrification.

In the building sector, which contributes over a quarter of the UK’s energy-related emissions, the IEA recommends focusing on energy efficiency upgrades and replacing fossil fuel heating systems with electric heat pumps. Although the UK has implemented strategies to decarbonize buildings, achieving ambitious targets will require further policy efforts and stable timelines.

The transport sector is the largest emitter in the UK and heavily reliant on oil. The UK has ambitious plans for zero-emission vehicles, and the report encourages sustained implementation of these plans. The industrial sector, which accounts for around a fifth of energy consumption and 14% of emissions, also needs energy efficiency improvements and investments in deep decarbonization. Supporting electrification, improving grid connections, and advancing technologies like carbon capture and hydrogen are crucial for industrial decarbonization.

The UK has made notable progress in its energy transition, leveraging its first-mover advantage and strong legal frameworks. However, it must continue moving from planning to rapid implementation to meet climate targets. The shift in the UK’s energy mix has seen a major decline in coal and growth in wind, bioenergy, and solar power. Domestic energy production now covers a significant portion of total supply, although fossil fuel reliance remains high.

Energy policies in the UK are managed at both national and devolved levels, with Scotland, Wales, and Northern Ireland setting their own targets. The UK government aims for net-zero emissions by 2050, guided by legally binding carbon budgets. The sixth carbon budget aims to reduce greenhouse gas emissions to 965 million tonnes CO2-equivalent between 2033 and 2037.

Since 2010, the UK has invested nearly £200 billion in low-carbon energy. To meet net-zero targets, future investments of £50-60 billion annually are needed. The government has committed significant funds to green initiatives and infrastructure, with £60 billion invested in low-carbon sectors in 2023. This investment is supported by institutions like the UK Infrastructure Bank and UK Export Finance, along with new roadmaps for various sectors.

In response to high oil and gas prices, the UK introduced the Energy Profits Levy in 2022, a temporary 35% surcharge on oil and gas profits, expected to generate nearly £15 billion by 2028. This levy, one of the highest globally, will remain until March 2028, though it may decrease if prices fall. The levy includes tax relief for investments in emission reductions.

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