The Future of the UK Energy Sector: A Path to Net Zero by 2035

‍The UK has set ambitious targets to fully decarbonize the electricity system by 2035 and achieve net-zero emissions by 2050. These goals require a major transition across industry, regulation, and government policy.

We explore the future of the UK energy sector and how it can achieve a clean, secure, and fair energy system for all on the path to net zero.

The UK’s Net Zero Ambitions

The UK has been a global leader in enabling low carbon electricity generation, and its net zero ambitions are clear. Three years ago, the Climate Change Committee (CCC) outlined five key net zero scenarios that underpin the progress necessary to achieve the target by 2050. These scenarios involve drastic demand and supply-side policies, resulting in a smaller and more efficient energy system. One common element in all scenarios is an increase in power generation from renewable sources.

Over the past decade, the UK has made significant strides towards its net zero goals. Coal power generation has been phased out, offshore wind capacity has been upscaled, and substantial funding has been granted for the development of carbon capture, utilization, and storage (CCUS) clusters. However, the next five years will be crucial in accelerating progress and ensuring the UK stays on track.

Current Energy Consumption and Challenges

In 2022, the UK’s energy consumption amounted to 168 million tonnes of oil equivalent (mtoe), with three-quarters coming from oil and gas sources. During winter months, this reliance on fossil fuels increases to nearly 80% due to higher demand for heating and electricity. While a milder-than-expected winter prevented further damage, it highlighted the importance of a strong domestic supply of energy.

A recent review led by Chris Skidmore highlighted the need for a “step change” in the government’s approach to delivering net zero. The review noted that the UK is set to miss its next Carbon Budget for the first time, primarily due to fuel consumption emissions rather than production. To achieve net zero, the UK must accelerate the decarbonization of power generation and scale up electrification across the economy.

The Transition to a Decarbonized Energy System

Offshore Wind and Renewable Power Generation

The UK has made significant progress in offshore wind power generation, positioning itself as a world leader in the sector. The North Sea Transition Deal (NSTD), released in March 2021, serves as a blueprint for achieving net zero targets. It outlines commitments to increase offshore wind capacity by 10GW to 50GW, including 5GW of floating offshore wind capacity. This expansion will further cement the UK’s position in offshore wind development.

In addition to offshore wind, the NSTD also emphasizes the importance of carbon capture, utilization, and storage (CCUS). The UK has committed £1 billion to develop four CCUS clusters by 2030, with the potential to store 20-30 million tonnes of CO2 annually. These clusters will also contribute to the development of low-carbon hydrogen production, which holds great potential for decarbonizing various sectors.

Demand-Side Policies: Heat Pumps and Hydrogen

To achieve net zero, the UK must not only focus on supply-side policies but also implement wholesale changes on the demand side. Currently, over 85% of UK households are heated by gas, indicating a significant reliance on fossil fuels. The government aims to address this by promoting the widespread installation of heat pumps, which are more energy-efficient and produce lower carbon emissions. The British Energy Security Strategy (BESS) targets 600,000 heat pump installations per year by 2028.

Hydrogen is another key component of the energy transition. The government aims to develop the necessary infrastructure to support hydrogen production. Blending hydrogen into the natural gas grid is being explored through trials in “hydrogen villages,” and a decision on blending up to 20% hydrogen is expected soon. Additionally, the BESS sets a target of 10GW of low-carbon hydrogen production capacity by 2030, leveraging the increasing capacity of renewable power generation.

The Role of the North Sea Transition Deal (NSTD)

The NSTD plays a crucial role in decarbonizing the UK energy sector. Released in 2021, the deal outlines over 50 government and industry actions across five commitments to accelerate the transition to net zero. It serves as an example of how oil and gas-producing countries can move towards a lower carbon future while supporting the economy, jobs, and energy communities.

The NSTD has already made significant progress in reducing greenhouse gas emissions from production by 20%. Industry focus is shifting towards the electrification of offshore assets, which will eliminate the need for onboard diesel and gas generators, reducing the carbon intensity of offshore infrastructure. Additionally, the NSTD has accelerated the development of carbon capture and storage (CCS) projects, with the potential to store over 75 gigatonnes of CO2 in the UK Continental Shelf (UKCS).

Challenges and the Way Forward

While progress has been made, there are still challenges to overcome on the path to net zero. The UK needs to address the gap between current policy development and the pace required to bring about real, sustainable change in the energy system. The government must continue to incentivize renewable power generation and private-sector investment, as well as implement demand-side policies to drive energy efficiency and behavior change.

Collaboration and innovation will be key in achieving the UK’s net zero ambitions. The energy sector, government, and industry stakeholders must work together to develop and implement new technologies, infrastructure, and market mechanisms. Continued support from the government through subsidies and demand/supply-side policies will be crucial in maintaining momentum and ensuring a successful energy transition.

The future of the UK energy sector lies in its transition to a decarbonized system. With ambitious targets to achieve net zero by 2050, the UK has already made significant progress in renewable power generation, offshore wind, and carbon capture. However, challenges remain, particularly in addressing fuel consumption emissions and accelerating the adoption of low-carbon technologies like heat pumps and hydrogen.

The North Sea Transition Deal (NSTD) serves as a roadmap for the energy sector, outlining commitments and actions to accelerate the transition to net zero. Collaboration, innovation, and continued government support will be essential in achieving the UK’s net zero ambitions. By acting now and implementing the necessary policies and technologies, the UK can achieve a clean, secure, and fair energy system for all, leading the way in global efforts to combat climate change.