Achieving net zero requires detailed policies and clear accountabilities, coupled with an immediate and sustained focus on delivery, to maintain the momentum provided by the Energy White Paper.

What this means

FES sets out different routes to net zero to accommodate uncertainty, but important policy decisions need to be made on:

• Relative roles of electrification and hydrogen for residential heating

• Level of support for energy efficiency measures

• Timings for transitioning away from unabated gas

• Extent to which natural gas is used in hydrogen production

Competitive markets and strategic planning are both needed to meet net zero. Coordination and collaboration are key when setting policy direction and parameters, whereas competitive markets are the best tool to deliver that policy at lowest cost and to foster innovative solutions.

Clear roles are needed between Government, regulator and industry to facilitate efficient transitions and market changes whilst maximising value to end consumers.

Improvements in energy efficiency of buildings, vehicles and appliances should be a low-regrets policy priority in all scenarios as reducing demand reduces the costs of energy security across the scenarios.

Consumer behaviour is pivotal to decarbonisation – how we all react to market and policy changes, and embrace smart technology, will be vital to meeting net zero.

What this means

Historically, changes to deliver decarbonisation have been on the supply side and largely invisible to consumers. However, to reach net zero there will need to be direct changes to consumer behaviour. What got us here, won’t get us there!

The journey to net zero by 2050 will involve multiple generations of consumers. Improved understanding of how we as consumers can help is required as polling currently suggests a significant gap.

How consumers engage with energy balancing will often be through upfront investment in smart technology that then optimises demand on their behalf (e.g. EV charging patterns). Digital solutions are required to prevent swings in demand caused by multiple smart systems responding to the same price signal.

As smart technologies and innovative business models develop, digitalisation and data will become increasingly important. A balance between open data and privacy must be found to promote trust and to unlock demand side flexibility – while embracing digitalisation.

Holistic energy market reform is needed to drive the investment and behaviour changes needed to deliver net zero and ensure security of supply at a fair and reasonable cost for all consumers.

What this means

Changes are needed to market and code designs to ensure that the right kind of flexibility can be harnessed to balance supply and demand across different locations and time periods – from ‘second by second’ to ‘seasonal’.

To attract new market participants, especially from the demand side, and to drive efficient signals, the market design arrangements must prioritise accessibility and competition.

A sustainable route to market is required to ensure the financing of renewable electricity capacity when the majority of generation operates at zero marginal cost. Market rules, processes and data must be transparent to build trust from participants and investors.

Whilst roll-out of ‘time of use’ tariffs is required alongside appliance automation, protection must be put in place to ensure fairness and to shield potentially vulnerable consumers from extreme price volatility.

Initiatives to incentivise new renewable or flexible capacity (e.g. Ofgem’s work on full chain flexibility) must continue to consider the impact on system operability. Similarly, markets must be designed coherently to deliver efficient and co-optimised investment signals across the whole energy system.
 

Significant investment in whole system infrastructure will be required over the coming decade. This should be optimised to ensure timely delivery and value for consumers. 

What this means

Coordinated offshore network development is required to integrate the target level of offshore wind with the wider electricity system by 2030. This development will also include multi-purpose interconnectors and potentially hydrogen in the future and so may require changes to industry roles and processes.

Onshore network reinforcement will also be required to avoid significant constraint costs caused by accelerated renewable connections, interconnectors and increased electrification of heat and transport – or to transition from natural gas to hydrogen. This can be minimised by deploying smart and innovative non-build solutions and integrated planning but remains a key challenge to delivering net zero fairly and at pace.

Hydrogen storage is necessary to support whole energy system security of supply as well as to accommodate electrolysed hydrogen at times of excess wind or solar. A strategic approach to its development is required to bring forward investment given the likely lead times involved.

Regional planning work across the electricity and gas transmission and distribution interfaces is required to ensure a fair and coordinated approach to network development and to minimise cost and disruption to end consumers.