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IEA: UK has made major progress in reducing emissions

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The International Energy Agency released its latest in-depth review of the United Kingdom’s energy policies on Thursday, welcoming reforms that aim to promote decarbonisation and innovation in clean energy technologies.

The review specifically highlights the UK government’s track record in climate action, both at home and globally.

“The United Kingdom has shown real results in terms of boosting investment in renewables, reducing emissions and maintaining energy security,” said Dr Fatih Birol, the IEA’s Executive Director. “It now faces the challenge of continuing its transition while ensuring the resilience of its energy system.”

In 2017, energy-related CO2 emissions in the United Kingdom reached the lowest levels since 1888. The report finds that this rapid reduction was achieved in part through significant renewable investment following the United Kingdom’s Electricity Market Reform (EMR). By 2030, the United Kingdom is forecast to see its share of variable renewables pass 50%. Amid this rapid change to a power system with a high share of wind and solar, market rules will need to accommodate flexibility, including interconnections, storage and demand response to maintain electricity security.

“This report highlights our reputation as a world leader in the global shift to greener, cleaner economies, cutting emissions by more than 40% since 1990 while growing our economy,” said Chris Skidmore, the UK Energy and Clean Growth Minister. “We can be proud of dramatically decarbonising our energy system thanks to record levels of investment in renewables, while security of supply has never been in doubt. But we’re not complacent and we’re now on a path to become the first major economy to legislate for net-zero emissions to end our contribution to global warming entirely.”

The IEA review finds that outside of the UK power sector, there is still significant potential for improvements. Reductions in greenhouse gas emissions in line with the Paris Agreement on climate change will require the scaling up of clean energy investment in the transport and heat sectors, a major focus of the government’s Clean Growth Strategy.

According to the report, action in these sectors will require a broad mix of solutions including technology innovation and electrification, stimulated by fiscal policies and energy efficiency that can help offset higher power costs. Finally, streamlining regulation in electricity wholesale and retail markets will be critical to ensure more effective and competitive markets. This will support electrification for the longer-term decarbonisation of the economy by 2050.

The report also praises the United Kingdom for its robust energy security policies. The Maximising Economic Recovery Strategy, led by the new Oil and Gas Authority, has stabilised oil and gas production in the North Sea. However, the eventual decline of domestic production will make the United Kingdom more dependent on imports. That decline, combined with slow progress in adding new nuclear capacity as well as retirements of existing coal and nuclear plants, means imports of electricity and natural gas will remain critical for the United Kingdom in the medium term.

In the context of the United Kingdom’s planned departure from the European Union, the report underlines that open and efficient energy trade relations remain vital to safeguard existing security and flexibility benefits enjoyed by the UK energy system.

The review also highlights international collaborative efforts by the UK government to strengthen global energy governance, global climate action and technology innovation. These were illustrated by the joint international summit on carbon, capture, utilisation and storage that the United Kingdom and the IEA’s held in Edinburgh in 2018; the United Kingdom’s leadership of Mission Innovation as the Chair and Head of the Secretariat; and the United Kingdom’s role as a founding member of the IEA Clean Energy Transitions Programme, which supports key emerging economies in their energy transitions.

“The United Kingdom is a strong partner for the IEA and its Member and Association countries in energy technology collaboration,” said Dr Birol. “The government’s efforts are an inspiration for many countries who seek to design effective decarbonisation frameworks.”

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Renewables Increasingly Beat Even Cheapest Coal Competitors on Cost

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Renewable power is increasingly cheaper than any new electricity capacity based on fossil fuels, a new report by the International Renewable Energy Agency (IRENA) published today finds. Renewable Power Generation Costs in 2019 shows that more than half of the renewable capacity added in 2019 achieved lower power costs than the cheapest new coal plants.

The report highlights that new renewable power generation projects now increasingly undercut existing coal-fired plants. On average, new solar photovoltaic (PV) and onshore wind power cost less than keeping many existing coal plants in operation, and auction results show this trend accelerating – reinforcing the case to phase-out coal entirely. Next year, up to 1 200 gigawatts (GW) of existing coal capacity could cost more to operate than the cost of new utility-scale solar PV, the report shows.

Replacing the costliest 500 GW of coal with solar PV and onshore wind next year would cut power system costs by up to USD 23 billion every year and reduce annual emissions by around 1.8 gigatons (Gt) of carbon dioxide (CO2), equivalent to 5% of total global CO2 emissions in 2019. It would also yield an investment stimulus of USD 940 billion, which is equal to around 1% of global GDP.

“We have reached an important turning point in the energy transition. The case for new and much of the existing coal power generation, is both environmentally and economically unjustifiable,” said Francesco La Camera, Director-General of IRENA. “Renewable energy is increasingly the cheapest source of new electricity, offering tremendous potential to stimulate the global economy and get people back to work. Renewable investments are stable, cost-effective and attractive offering consistent and predictable returns while delivering benefits to the wider economy.”

“A global recovery strategy must be a green strategy,” La Camera added. “Renewables offer a way to align short-term policy action with medium- and long-term energy and climate goals.  Renewables must be the backbone of national efforts to restart economies in the wake of the COVID-19 outbreak. With the right policies in place, falling renewable power costs, can shift markets and contribute greatly towards a green recovery.”

Renewable electricity costs have fallen sharply over the past decade, driven by improving technologies, economies of scale, increasingly competitive supply chains and growing developer experience. Since 2010, utility-scale solar PV power has shown the sharpest cost decline at 82%, followed by concentrating solar power (CSP) at 47%, onshore wind at 39% and offshore wind at 29%.

Costs for solar and wind power technologies also continued to fall year-on-year. Electricity costs from utility-scale solar PV fell 13% in 2019, reaching a global average of 6.8 cents (USD 0.068) per kilowatt-hour (kWh). Onshore and offshore wind both declined about 9%, reaching USD 0.053/kWh and USD 0.115/kWh, respectively.

Recent auctions and power purchase agreements (PPAs) show the downward trend continuing for new projects are commissioned in 2020 and beyond. Solar PV prices based on competitive procurement could average USD 0.039/kWh for projects commissioned in 2021, down 42% compared to 2019 and more than one-fifth less than the cheapest fossil-fuel competitor namely coal-fired plants. Record-low auction prices for solar PV in Abu Dhabi and Dubai (UAE), Chile, Ethiopia, Mexico, Peru and Saudi Arabia confirm that values as low as USD 0.03/kWh are already possible.  

For the first time, IRENA’s annual report also looks at investment value in relation to falling generation costs. The same amount of money invested in renewable power today produces more new capacity than it would have a decade ago. In 2019, twice as much renewable power generation capacity was commissioned than in 2010 but required only 18% more investment.  

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Greater investment in clean, secure and sustainable electricity systems amid Covid-19 crisis

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Energy ministers and electricity industry CEOs from around the world took part in a roundtable discussion today about the impact of the Covid-19 crisis on the electricity sector and the need to mobilise investments for secure and sustainable power systems. The high-level virtual meeting was co-hosted by the International Energy Agency and the Government of the United Kingdom.

The discussion focused on the implications of the Covid-19 crisis for investments in the power sector that are needed to support clean energy transitions, as well as the opportunities for international co-operation and collaboration. The participants recognised the critical importance of the electricity sector in the response to the Covid-19 pandemic to keep essential services running, hospitals open, and communication flowing. They applauded the efforts of electricity companies and their employees in keeping the lights on despite the health risks involved.

Participants included 11 government ministers and 9 company CEOs, representing 5 continents and 60% of the global electricity system. The discussion was co-chaired by Dr Fatih Birol, the IEA Executive Director, and Kwasi Kwarteng, the United Kingdom’s Minister for Business, Energy and Clean Growth. The list of high-profile attendees and a link to the Chairs’ Summary can be found below.

“Resilient electricity systems are vital for modern societies today and for a sustainable energy future, but they need much greater investment,” Dr Birol said. “It was highly encouraging to see so many global energy leaders focused on this critical issue today. The IEA’s World Energy Investment 2020 report this week highlighted that global investment in the power sector is set to fall 10% this year, compounding previous declines. The drop in investment in electricity grids, an essential but often overlooked part of the shift to cleaner energy, is set to be even steeper. Renewables like wind and solar won’t be able to fulfil their great promise without robust infrastructure that reliably delivers the power they produce to consumers.”

Today’s roundtable discussion on electricity systems was one in a series leading up to the IEA Clean Energy Transitions Summit, which will take place on 9 July.

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Deloitte Study: Navigating the Energy Transition from Disruption to Growth

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Despite current economic challenges, energy and industrial leaders are expected to remain committed to their long-term plans to reduce fossil fuel reliance.

Eighty-nine percent of executives surveyed across energy and industrial sectors reported already having or developing a strategy to reduce reliance on fossil fuels.

While a temporary pause in spending on some priorities and technologies is expected, as companies await a recovery, they are unlikely to be canceled completely.

Momentum for action on decarbonization, reinforced by growing consumer and stakeholder pressures, will likely not be compromised by present circumstances.

Why this matters
In the wake of the COVID-19 pandemic, oil price collapse, and increasingly challenged economy, many have questioned if the pace of the global energy transition has been disrupted and whether energy and industrial companies will remain committed to their decarbonization goals. Deloitte’s “Navigating the energy transition from disruption to growth,” report examines progress to date in the energy transition, the decisions management teams in the energy and industrial sectors are facing, and how the current economic environment could affect the transition’s future trajectory. As part of this study, Deloitte surveyed 600 C-suite executives and other senior corporate leaders globally for their perspectives around low-carbon trends and strategies.

Energy transition remains a priority for energy and industrials
Despite the current economic challenges, the survey study findings suggest that energy and industrial leaders are expected to remain committed to an energy transition that they believe can help reduce costs, increase customer loyalty and make their companies more competitive.

  • Eighty-nine percent of surveyed executives (92% oil and gas, 92% power and utilities, 87% chemical, 87% industrials) reported their companies either already had a plan or were developing a strategy to reduce reliance on fossil fuels. 
  • Across sectors surveyed, some of the top drivers of decarbonization included customer focus and digital technologies supporting energy efficiency (i.e., cost savings) and decarbonization.
  • More than 50% of the executives reported that meeting decarbonization reduction targets are tied to board and/or executive compensation.
  • Seventy-one percent of CEOs surveyed across industries said that the key benefit achieved from their plans for a lower-carbon future was to improve the environment.
  • While environmental benefits will likely be deemphasized as companies regain their footing through the economic crisis, reducing costs and maintaining a competitive position are expected to remain important even in the downturn.

Decarbonization a strategic imperative for oil and gas
The energy transition is having a mixed impact on the oil and gas sector, as decarbonization is expected to slow long-term oil demand growth. Most company leaders in this sector however appear to recognize this reality and are rethinking where and how they do business in a decarbonizing world. Many are making the energy transition a strategic priority, as evidenced from the survey results detailing the scale of plans and commitments in place.

  • Sixty-eight percent of surveyed CEOs indicated that the key component of their decarbonization strategy was a focus on low-carbon fuels, including natural gas.
  • Oil and gas executives cited consumer support and regulatory mandates including policy incentives, as the top drivers for the energy transition.
  • Almost half (49%) of oil and gas company respondents said they plan to switch to cleaner fuels or renewables in their facilities and field operations. 
  • Further down the value chain, 57% of chemical executives reported that their company has invested in renewables to reduce emissions and waste.
  • More than half (56%) of oil and gas respondents indicated that plan metrics to reduce reliance on fossil fuels were tied to executive compensation.
  • When asked if a low-carbon future would have a positive, neutral, or negative impact on the future of their organization, over 60% surveyed said it would have a positive impact.

Technologies play key role in business climate goals
Survey respondents overwhelmingly cited technology as a key enabler of progress in the energy transition. While a near-term pause in spending on new technologies is expected, they are unlikely to be canceled completely as these investments help increase operational efficiency, reduce carbon emissions, and benefit companies in the long run.

  • Digital technologies that improve energy efficiency were ranked as the top priority for oil and gas (59%); and industrial products and construction (53%) executives surveyed.
  • Carbon-capture-utilization-and-storage (CCUS) and other carbon-reducing technologies were identified as a key component to emission reduction by oil and gas (54%); and chemicals and specialty materials (54%) surveyed leaders. 
  • Nearly 70% of executives who reported that they have a sustainability strategy in place, cited digital technologies supporting sustainability and energy efficiency as the key driver.
  • Top accelerators to achieving decarbonization goals among oil and gas surveyed executives included partnerships; mergers and acquisitions; and organic investments.

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