Posted: 4 August 2016

A changing landscape

FES, scenarios, UKERC, energy, future, demand, consumption, supply, electricity, gas, renewables, nuclear, CCS, affordability, investment, carbon, heating, transport, storage, regulatory
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Generation from renewable electricity sources increased substantially in the past year.


Professor Jim Watson, Director of the UK Energy Research Centre (UKERC), was guest speaker at this year’s Future Energy Scenarios launch. Here he offers his reflections on the value of scenarios, what we can learn from this year’s FES and the changing nature of the energy landscape.

This blog expresses the views of the author and is not intended to be the view of National Grid.

In the energy industry and beyond, scenarios are used for a wide range of purposes. They can be a valuable tool for policy-making and enable businesses to develop strategies based on credible insights. They also fall into two distinct categories: goal-driven, for example ‘how can the UK meet the 2050 carbon emissions target?’ and exploratory, such as examining how different futures might play out, which is where the FES play an important role.

As researchers we are sometimes confronted with questions about the accuracy of scenarios. It is important to emphasise that they are not predictions, rather they help us to understand in broad terms how the future might look. Current trends and preoccupations tend to be reflected in scenarios too. For example, at present UK energy demand is falling and so too are energy prices, but both trends may reverse in future.

The UK’s low-carbon transition

In terms of environmental targets, the UK has actually made quite strong progress in reducing carbon emissions to date. The first carbon budget between 2008 and 2012 was achieved on time and latest Government figures show a 35% reduction in total greenhouse gas emissions between 1990 and 2014.

A word of caution here, however. As investors are often warned, past performance is not necessarily a guide to future returns. There is no guarantee that we will continue to follow the same path over time and there remains a tremendous amount of work ahead to reach the 2050 carbon reduction target (reducing carbon emissions by at least 80% from 1990 levels). The Committee on Climate Change have repeatedly stated that there are big policy gaps which need to be filled if future budgets and targets are to be met – for example on energy efficiency and low-carbon heat.

Nor is the UK Government solely focused on carbon reduction as an objective. Other energy policy goals including energy security and affordability must also be addressed. It remains to be seen how the recently announced change of departmental ‘ownership’ for energy policy will change the balance of these priorities. The merger of DECC and BIS means that industrial development is also likely to be an explicit energy policy goal in future.

Insights from this year’s FES

The first key message from this year’s scenarios is that the decarbonisation agenda is driving significant changes in energy markets with an increasingly diverse mix of new energy sources. The UK energy system has already undergone significant change, particularly in electricity. The replacement of coal with gas in the ‘dash for gas’ in the 1990s has been followed more recently by the rise of renewables.

So, are we entering a more radical phase and will smarter power systems and increasing deployment of energy storage technologies become a reality? There are still technological barriers to overcome and storage technology costs need to come down. Ambitious programmes such as the storage mandate in California may help to address these barriers. The market regulatory framework needs reform because it is still tailored to the supply side and larger generators.

Meanwhile, there is a continuing public debate about shale gas. But very little development is underway. Its future will be determined by economics, which remain uncertain, as well as the extent to which public concerns can be addressed.

Meeting the renewables target

We have seen generation from renewable electricity sources increase substantially in the past year. Indeed, since the early 1990s when renewable generation provided just 2% of our electricity, the figure now stands at about 25%. Further progress means that the informal ‘sub target’ for renewable electricity generation by 2020 is likely to be met. However, as the 2016 FES implies, we are likely to fall short of the overall target for renewables (including heat and transport).

Wind energy may be the most recognisable technology to most people. However it accounts for only around 20% of the renewables total across electricity, heating and transport. Bioenergy is responsible for over two thirds of renewable energy, while hydro is 4% and solar 3%.

Action on the 2050 carbon reduction target

The 2016 FES identify the importance of three key technologies in enabling the decarbonisation of electricity generation, heating and transport; namely nuclear, renewables, and carbon capture and storage (CCS). As noted above, this is not entirely accurate since renewables includes a basket of technologies rather than a single solution. However, the absence of a major technology – for example, due to poor economics or policy choices – could make achieving some policy goals more difficult.

In recent months the UK Government has made some explicit choices about which technologies it will support and which it will not. In effect, these are the winners and losers in terms of future investment.

Last November’s cancellation by the Government of the £1 billion CCS competition was a stark reminder that political decision-makers rarely pursue all options in front of them. Likewise, we have seen the removal of support for onshore wind and solar deployment, as well as the end of Government funding for the Green Deal programme aimed at home energy improvements.

While the Green Deal was clearly not working and needs to be replaced by a more effective policy, the other decisions are more problematic. They have prematurely removed support for some of the cheapest low-carbon options, and have taken off the table a technology (CCS) that many think is critical for low-carbon energy systems in the UK and abroad.

The importance of gas

The role that gas will continue to play in Britain’s future energy mix is highlighted in the scenarios. Although a lot has been written about gas as a ‘bridge’ to a low-carbon future, a lot of this bridge is actually behind us in the UK. We have been on a transition from coal to gas since the early 1970s, and this has delivered significant emissions reduction across the economy. There is now limited scope for the UK to reduce emissions through coal-to-gas switching.

Looking ahead, until the late 2020s gas consumption is likely to remain significant. Beyond then UKERC’s recent research shows a divergence in gas futures, with consumption potentially falling much more quickly if we don’t have large-scale deployment of CCS from the mid 2020s.

Uncertainty set to continue

In a wider context, the UK’s decision to leave the European Union is fresh in the mind and the ramifications of this vote are still unclear. We were already living in an uncertain energy world and those uncertainties have been compounded by the referendum outcome.

The implications are yet to be resolved, from the impact on investment in general and in the UK energy sector, through to the UK’s relationship with the European energy market and climate change targets and policies. One of the most worrying side effects of the referendum was the denigration by some of independent expertise. Given the scale of the energy challenges we face, such expertise and evidence will be crucial to inform the choices that lie ahead.NG FES logo_500x161

Related links:

What will Britain’s future energy landscape look like? National Grid’s 2016 Future Energy Scenarios (FES) explore credible pathways up to 2050.

Here are 10 things we learned from the four scenarios that the 2016 FES offer.

Alice Etheridge, National Grid Insights Manager, explains how the FES are used and examines what each scenario might mean for how we live our lives in 2040.

Gas innovation in full flow
“In recent months the UK Government has made some explicit choices about which technologies it will support and which it will not”

Professor Jim Watson, Director of the UK Energy Research Centre (UKERC).