All around the world, governments’ energy policies are at a crossroads. In order to insulate themselves from dependence on Russian oil and gas, tackle rising living costs and enact sanctions against Vladimir Putin, governments are collectively clamouring to diversify their energy supplies
This will be easy for some nations, but more challenging for others. In the UK, Russian gas made up less than 4% of the total British gas supply in 2021, while in Germany just over 30% of primary energy input, across coal, oil and gas, comes from Russia. The varying degrees of dependence present both challenges and opportunities for the low carbon transition.
The UK government is expected imminently to publish its Energy Strategy that will set out how it intends to reduce the nation’s reliance on energy imports and speed up the transition to net zero. It will be a test case for an economy still heavily hooked on fossil fuel use but with huge untapped renewable energy potential and an economic ‘levelling-up’ agenda for its regions that could benefit greatly from investment in low carbon transition.
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A sustainable energy strategy
Confounding a determined fossil fuel lobby seeking to exploit this moment to prolong the use of coal, oil and gas, with impeccable timing, the Committee on Climate Change (CCC) has been very clear, they say that if gas prices remain high, which is very likely, the cost of achieving net zero would be a saving of 0.5% of GDP, rather than a cost.
The UK strategy will also land at a time of heightened concern among British people. New polling from Ipsos Mori shows that more than 8 in 10 (83%) people are worried about how dependent the UK is on energy imports from other countries. Crucially there is appetite for rapid change: 77% of British people support investing more in renewables to reduce dependence on imports and the same number of people support measures to reduce energy demand, either through efficiency or other means.
Much of what has been trailed in the press appears promising, including the bullish rhetoric on renewable energy with the Prime Minister himself noting that “renewables are the quickest and cheapest route to greater energy independence”. More recently, Conservative MP Bim Afolami called for the UK to get on a “war footing” to deploy renewables. This is the language of the Green New Deal cloaked in concerns over energy security.
But there are still reasons for concern. The Prime Minister has insisted that now’s the time to make “big bets” on nuclear energy, even though it will make no difference to energy supply in the upcoming period that is critical in terms of both climate and geopolitical action. Nuclear development times are long, and always longer than promised by the industry, and while renewable costs have plummeted, nuclear costs are eye-wateringly high and keep rising. There are also rumours of relaxing regulations to boost North Sea extraction, despite greater levels of production being uneconomical, doing little to dent energy bills and being completely incompatible with our commitments under the Paris Agreement and net zero target. There are also fears over what will be omitted from the strategy.
There are very real concerns that it will be light on measures to improve energy efficiency and demand reduction – both of which have a vital part to play in curtailing emissions and cutting fossil fuel use instantly and cheaply. Even the often conservative International Energy Agency is calling on governments to introduce working from home mandates, lower speed limits and car-free Sundays in cities as emergency measures to cut fossil fuel demand.
The current energy policy crossroads define the speed and depth of the UK’s transition. And the seriousness of the moment demands an all-encompassing approach which understands that, at this point in time, all policy is climate policy. With this understanding, the Rapid Transition Alliance’s alternative energy strategy cuts across energy, housing, industry and transport to deliver the scale of change and ambition this moment requires. While bold, many of these ideas and proposals already have been introduced and implemented around the world in response to the climate crisis or previous fossil fuel energy crises. We are surrounded by an abundance of evidence-based hope for what the next few years can hold and in such moments of darkness, hope is a guiding principle that can shine a light on the path ahead.
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The Energy Strategy presents an opportunity to more fully achieve the UK’s huge, still untapped potential for renewable energy. Building up capacity to generate clean and cheap energy creates the foundation for electrifying much of the economy, including transport and heating. At a time of sky-high wholesale electricity prices, renewable energy sources like wind and solar are extremely cheap. At approximately £50/Mwh for new solar and wind projects, this resilient source of electricity is at least four times cheaper than current wholesale prices. In 2022, solar and wind farms are the quickest route to ensuring long-term energy security and the phase out of fossil fuel use.
But renewable energy projects still take time to plan, construct and switch on, with a variety of potential obstacles on the way. As such, new renewable projects are unlikely to have a marked effect on energy bills come winter 2022. To have an instant impact on the UK energy landscape, and help those families feeling the squeeze, the energy strategy must focus on reducing the demand for energy through a nationwide programme of retrofitting and insulating every home, creating jobs and improving the lives of millions overnight.
There are also a variety of ‘low hanging fruit’ household behaviours that can cut bills and gas use, like turning the flow temperature of your gas boiler down to around 50 degrees, which can cut bills by between 6% to 8% a year. For added savings, it’s also recommended to bleed your radiators and plug draughts around doors and windows. To scale up these measures, the government could roll out a major public information campaign that paints these behaviours as ways of cutting waste, cutting bills and cutting our dependence on fossil fuelled despots. This will resonate with the public far more than referring to ‘energy efficiency’ or ‘demand reduction’.
While demand reduction is probably the least sexy instrument in the decarbonisation arsenal, it is the cheapest and fastest to cut bills and Russian gas imports, that latter relatively small for the UK. But the responsibility to reduce the demand for energy shouldn’t just fall on the shoulders of individuals. Government policy around homes’ energy efficiency and insulation needs to urgently change tack, as well as bulking up existing policies such as the Boiler Upgrade Scheme and the gas boiler phase out. E3G has provided an impressive nine steps that the government could immediately take using existing mechanisms and policies to cut Russian imports by 80% this year and save an average of £150 per household.
There are immediate steps the government can take to cut bills and our dependence on energy imports, but to deliver cheap, secure and sustainable energy for the foreseeable, reform shouldn’t stop at the sources of primary energy – we need to open up novel models of ownership and reform distribution networks. This week Ripple Energy opened the UK’s first community-owned wind turbine in South Wales, drawing investment from 907 members of the community. Now the blades are in motion, the 900 plus investors will be getting their energy from the wind turbine, which is set to cut their bills by 25% a year for the duration of the turbine’s 25-year lifespan. This form of ownership, pioneered by Ripple Energy, has huge potential in boosting support for the transition, cutting bills and bending the emissions curve. The model’s popularity and success in Denmark, Germany and Scotland is testimony to what it can deliver for households across the UK.
For long-term savings and security, the UK’s energy distribution network urgently needs reform. The distribution network operators and (DNOs) and gas distribution networks (GDNs) play a vital role in the provision of energy in Britain – and are handsomely rewarded for it. Between 2017 to 2021, dividend payments to the shareholders of DNOs hit £3.6 billion and for GDNs the figure was £2.4 billion. This distribution network, where just a few companies own more than 90% of the market, has economically indefensible profit margins: for DNOs the average profit margin is 42.5% and for GNOs it is 40.5%. To put this in perspective, the average profit margin of the FTSE100 company is 10%. Bringing these firms, which are often owned by foreign investors based in tax havens, back into public ownership will ensure that the affordable energy and security renewables can bring to the table are enjoyed by every household in Britain, not profiteering corporations. In the meantime, let’s implement a windfall tax on their sky-high profits to help households deal with rising bills and fund the transition.
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Housing and industrial policy
Ending our reliance on all gas – not just Russian gas – will require transformations in the way we build new homes and renovate old ones. The UK’s housing stock is some of the oldest and draughtiest in Europe, with millions of families living in poor housing conditions and suffering from fuel poverty. With the energy bill hikes imminent, a total of six million British homes may slide into fuel poverty – the highest level since records began. Already today, 12,000 Brits die each year as a result of the health conditions that accompany living in a cold, draughty home. In light of rising bills and dipping living standards, this number is likely to rise during winter 2022. And to complicate matters further, 85% of UK homes use gas for cooking and heating, locking millions into continued fossil fuel use and sky-high bills.
Any attempt to decarbonise housing must start with a deep and far-reaching retrofit programme. To hit net zero by 2050, 26 million British homes need to be retrofitted. But in light of high bills and Russian aggression, there’s an imperative to go full steam ahead before winter 2022. Rapidly retrofitting UK homes would deliver a substantial jobs boost. According to NEF, an ambitious retrofit programme in the UK could create 500,000 good green jobs. Modelling also shows that the economic value generated through retrofitting far outstrips the initial capital outlay. Estimates vary, but some studies suggest that a deep retrofit programme has a net-present value of £7.5 billion by 2035. If you include the health benefits of living in warmer and more energy efficient homes, the value could be up to £47 billion. The British public are supportive of measures to improve the comfort and durability of their homes, with polling from 38 Degrees showing that 86% of the public support government grants for improving home insulation.
Such a rapid and ambitious retrofitting programme would require the government to invest, but there are multiple sources of potential investment from government spending, investment ‘quid-pro-quo’ obligations on pension funds that enjoy tax incentives, green quantitative easing via an infrastructure bank or banks, and retrofitting needn’t be a top-down, one-size-fits-all affair. All around the world, citizen-led retrofitting and energy efficiency cooperatives have managed to improve the housing of whole communities, while cutting carbon. The Energy Communities Tipperary Cooperative in Ireland have renovated 827 houses, 25 communal and commercial buildings and built enough renewable energy to power hundreds more homes all through the citizen-led model. In the Welsh town of Carmarthen, a similar citizen-led approach retrofitted homes and, as a result, hospital admissions dropped by 3,000. By matching local needs with local skills and businesses, local economies blossomed, health improved and bills were cut. The UK government needs to look at the benefits and co-benefits that community schemes can offer alongside the sizeable tools of government procurement and fiscal incentives, as well as strengthening the myriad of existing policies and schemes targeting household efficiency. For instance, cutting VAT to 5% (from 20%) on home improvement materials would result in a £51 billion stimulus and the creation of 350,000 jobs, while costing the taxpayer only £2.7 billion.
While insulating every home in the UK would reduce energy demand and cut bills overnight, it wouldn’t rid homes of fossil fuel gas. The most effective way to get gas out of our homes is to electrify heating and cooling, with the humble heat pump in pole position as the technology of choice. Fortunately, heat pump markets across the world may be reaching a positive tipping point after a bumper 2021. Heat pump installations in France grew by 53% last year, and in Poland’s heat pump market grew by 66%. Further afield, the Chinese heat pump market grew by 40% last year. This rate of global growth will help drive down costs further, making the jump to a heat pump the economical choice. Even without a significant drop in installation costs, current gas prices make it cheaper to use a heat pump rather than relying on a polluting boiler.
The UK government currently has measures in place to help homes get off gas, with grants of up to £5,000 paid to installers rather than direct to consumers available from April. But the sums allocated by the government up to 2025 will only be sufficient for 90,000 heat pump installations when we need millions. E3G argues for a greater amount of ambition and £4.15 billion worth of investment to expand the Boiler Upgrade Scheme to a level that supports 820,000 heat pump installations up to 2025, reducing gas demand by 8TWh a year and boosting demand for this essential piece of tech. This this policy would be popular with the vast majority of the public, with 64% believing that the government should expand the Boiler Upgrade Scheme to over 90,000 homes. Leveraging the moment someone buys or moves house could also boost heat pump uptake. These so-called life course changes can disrupt old habits and create an appetite for sustainable behaviour change – both of which are essential for rapid transition. E3G recommends that the government take advantage of these by implementing an energy saving stamp duty incentive, where more efficient homes pay a lower rate. Such a measure would incentivise those buying homes to improve their homes’ energy performance and could be targeted towards supporting poorer households, while being revenue-neutral for the Treasury and stimulating substantial investment.
But, of course, who is going to do the vital work of insulating homes and installing heat pumps? The scale of action needed, and the urgency with which we must act to help those most in need before winter closes in, requires a seismic shift in the provision of green skills and training and support to building new supply and value chains. In the UK today, there are only 2,000 trained heat pump installers. By 2030, we need an army of 50,000 to hit our targets. Fortunately the UK has an abundance of heating engineers – 180,000 of them – who could be retrained in up to 5 days in heat pump installation and low temperature heating. The government could drive this mass upskilling, covering the entire costs of training for everyone of the 50,000 engineers we need by 2030 for less than £100 million spread over the next eight years. In the words of E3G, “the returns on this relatively limited investment could be enormous”.
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We cannot unshackle ourselves from dependence on fossil fuel imports without tackling transport policy. Russian imports account for 8% of total UK oil demand but when it comes to diesel, the figures are far higher. In 2020, the UK imported 11.6 million tonnes of diesel-type fuels, with a third of this coming from Russia. Phasing out Russian imports, which the government has already announced, could hit people harder at the pump when they are already facing record-breaking fuel prices. Without comprehensive and targeted efforts to bolster the alternatives to petrol and diesel vehicles, soaring prices and constrained supply will hit working families hardest – that is a fact.
Improving and expanding affordable public transport and active travel infrastructure for cycling and walking is the quickest way to cut petrol and diesel use, while helping families shoulder rising living costs. Introducing a new range of railcards, publicised through a public information campaign, is highly likely to be introduced next week but the government could – and should – go further. In New Zealand, for instance, the government has temporarily halved fares on public transport in response to soaring fuel prices at a cost of between NZ$25 and NZ$40 million. In the Austrian city of Vienna, for instance, a yearly fee of €365 – that’s €1 a day – gives you unlimited access to public transport. Half of Vienna’s population, which is around one million people, has paid for one of these transport cards, and 38% of all journeys are made by public transport with walking now more popular than the car, which accounts for just 27% of trips.
Some towns, cities and whole countries have gone further to entice citizens onto public transport by making it completely free at the point of use. In the Estonian city of Tallinn in Estonia, making public transport free increased ridership by 14% in the first year and greatly benefitted lower income households in and around the city. While 14% doesn’t seem like a lot, consider that in Tallinn public transport usage is already extremely high due to a great provision of service and low fares, with 8% of this increase made up of car users jumping on public transport. The policy has also been a resounding success amongst Tallinners: polling shows a 90% approval rate.
There’s also scope to scale up e-mobility and cargo bikes to get Brits to ditch their cars. Cargo bikes are enjoying healthy uptake in the UK among citizens and businesses, with some of Britain’s top cycling manufacturers like Raleigh eyeing up significant growth after sales increased by 75% in 2020. Cargo bikes could significantly cut the energy used for logistics and e-commerce deliveries. A study from Possible found that cargo bikes cut emissions by 90% compared with diesel vans and by a third when compared with electric vans, while speeding up delivery times by 60%. To get citizens out of cars and onto bikes, many countries are rolling out exchange schemes, like the one in France, where you can trade in your ageing car for a brand new electric bike to the value of €2,500. Ministers here in the UK have urged to promote e-bikes through a subsidy scheme that could deliver £2 billion in health benefits while cutting emissions by a million tonnes.
Many of the above policies will help urban dwellers, but over ten million British people live in rural areas. In these locales, the onus must be on restoring and expanding public transport routes that were cut. These rural communities are particularly vulnerable to fossil fuel price hikes, as they often use heating oil to heat their homes and rely on cars, which can perpetuate the cost of living crisis. It’s in areas like these where the interconnected nature of policy truly matters in the face of sliding living standards and the climate crisis: transport, housing and energy are deeply interwoven for rural communities and you cannot address one without addressing the other. If we are going to transition rapidly, we need to take everyone with us for the ride.
The invasion of Ukraine, the fossil fuel energy crisis, and sliding living standards around the world, provides a snapshot of what humanity’s future could look like if we fail to rapidly move away from our dependence on fossil fuels. The benefits that would be accrued from taking instant and ambitious action across the sectors of energy, housing, industry and transport will be felt by all, through cosier homes, cleaner air and more money in our pockets at the end of each month. The urgency of tackling the climate crisis and reducing our reliance on foreign despots makes a rapid transition the only viable option: the swiftness with which we build an energy system based on resilient homegrown renewable sources, the sooner we sap the war chest and political capital of pariah states. The quicker we shift away from fossil fuels, the faster we reduce the suffering that millions of British households are staring down. Now’s the opportunity to insist – fiercely and unapologetically – that we want a rapid transition and we want the benefits to be shared by all.