Shifting the focus: 6 Using zero carbon energy

Nick Eyre

Introduction

Earlier chapters of this report set out the scope for reducing energy demand through deployment of improved efficiency and changes to energy-using practices. These are very significant and, in many cases, likely to be cost effective in a zero carbon economy. However, even with significant improvements in efficiency and reductions in demand, the fuels used throughout the economy will need to be decarbonised. This has obvious implications for the energy supply system, but it will also require major changes in the way that energy is used.

This chapter sets out the issues involved in moving towards the use of decarbonised fuels. Using a demand-side perspective allows the incorporation of important questions such as ‘How much energy do we need?’, ‘What are the alternatives for providing a similar service?’ and ‘How socially acceptable are they?’ into the analysis.

To date, the main focus of the transition to zero carbon fuels has been on electrification. Decarbonisation of energy services that are difficult to electrify remains less well- addressed. This is now widely accepted as the major challenge for decarbonisation of energy. It is clearly a challenge for new forms of energy supply to scale up to replace petroleum and natural gas. However, there are also huge implications for energy users. In most cases, switching from high carbon to zero carbon fuels cannot be achieved without changes in technology and practices at the point of energy use.

Current UK policy set out in the Clean Growth Strategy (CGS) reflects some of these issues and the potential role of fuels other than electricity, particularly in its hydrogen pathway in the sections on “transforming manufacturing and heavy industry” (page 68), “the future of heat decarbonisation” (page 82) and “lower carbon (transport) fuels” (page 91). In each case, some relevant innovation challenges are identified. However, the demand-side challenges associated with use of zero carbon fuels are not fully addressed.

Electrification of demand and its limits

Electricity has proven to be the easiest energy vector to decarbonise. There are multiple low and zero carbon options. There has been huge progress in reducing the cost of solar and wind technologies; these are now broadly competitive with conventional generation under UK climate conditions, and further price reductions are likely.

The potential role of increased electrification in decarbonisation has been known for many years in buildings (Johnston et al, 2005), transport (Romm, 2006), and more broadly (Edmonds et al, 2006). However, only more recently have mainstream studies projected electricity to become the dominant energy vector, both in the UK (CCC, 2008; BEIS, 2017) and internationally (IEA, 2015; IPCC, 2014; Sugiyama, 2012).

The extent to which electrification will increase total demand for electricity will depend on the balance between demand reduction and electrification (Eyre, 2011). Assumptions about demand reduction opportunities, in particular, have led to very different official projections for electricity demand growth, for example much lower in Germany (BMWi, 2015) than in the UK (DECC, 2011). Many models designed to address global climate issues are insufficiently detailed to address energy demand questions reliably (Lucon et al, 2014). Only recently have global analyses emerged that allow for known demand reduction opportunities (e.g. Grübler et al, 2018), showing the important potential of demand-side change for climate mitigation.

Greater levels of electricity demand flexibility will be needed in a system with increasing levels of variable and inflexible generation (see Chapter 5). However, this is far from the only constraint on electrification. There are several energy services for which use of electricity as a replacement for other fuels is problematic. These are discussed below.

• Industrial processes. These are highly diverse, but many rely on fossil fuels for reasons other than their energy content. These include the roles of high temperature flames in heat transfer, and the chemical properties of fuels, for example as a chemical reducing agent or a feedstock.
• Freight transport, shipping and aviation. Whilst electric vehicles (EVs) are now widely expected to become the low carbon choice for light vehicles, electricity storage for electrification of road freight, shipping and air transport is more problematic, because of the weight and volume of batteries required.
• Space heating in buildings. The scale and seasonality of space heating demand imply that complete electrification would require very large investments in either or both of peaking generation and inter-seasonal energy storage. Both are likely to remain expensive, making complete electrification an unpromising strategy.

Low carbon vectors other than electricity are required to address user issues in these sectors, but also to replace the long-term energy storage provided by fossil fuels.

Alternatives to electrification

The most commonly considered non-fossil alternative in these applications is biomass. There is a very active debate about its role in global decarbonisation driven by concerns about its availability, its potential to compete with food crops, biodiversity impacts and the sustainability of the natural carbon cycle. In the UK, constraints are amplified because of the high population density: the practical resource is only ~10% of current UK energy use (Slade et al, 2010; CCC, 2018a). Whilst importing biomass is possible, it seems unlikely to be a secure option for the UK in the context of global demand for low carbon fuels. Moreover, in terms of climate mitigation, these limited supplies of biomass are better used for sequestering carbon than for combustion without carbon capture (CCC, 2018a).

More recently, attention has focused on hydrogen (BEIS, 2017; CCC, 2018b). Whilst the investment costs of a transition to hydrogen would be very large, there seems little doubt that it is technically possible to convert gas distribution grids to hydrogen (Sadler et al. 2016). This would offer significant benefits in avoiding stranded assets in the gas sector. The Clean Growth Strategy assumes that the preferred route to hydrogen production will be steam methane reforming of natural gas with carbon capture and storage (CCS). Analysis indicates it is likely to be the cheapest option (CCC, 2018b). However, CCS is not well-established at a commercial scale, so costs are uncertain. Other options exist (RS, 2018). The most promising is electrolysis, as lower costs and rising output from variable renewables will increasingly make cheaper electricity available for large parts of the year (Philibert, 2017).

There are other hydrogenous gases and liquids which are potentially easier to store and transport. There is increasing attention to ammonia produced from renewables, as an industrial feedstock, a fuel for shipping and an energy storage medium. Carbonaceous liquid fuels, synthesised from hydrogen and carbon dioxide, can be carbon neutral and have obvious attractions in transport. However, feedstocks and/or conversion processes would have to change for costs to be competitive with other low carbon options.

A demand-side approach

Perspectives that focus solely on decarbonising energy supply imply that there will be wholesale change to the energy supply system, but no significant change to the structure of demand. This is contrary to the experience of previous energy transitions. The development of coal supply and steam power is synonymous with the industrial revolution, in which human economic and social activities were transformed. Similar effects can be expected in the low carbon transition. Supply technologies will coevolve with the activities and technologies that use energy. Buildings, transport and industry, and their energy uses, are all likely to be very different after a zero carbon energy transition. We therefore recommend that analysis of fuel decarbonisation includes assessment of the implications for energy use and the potential for alternative approaches to providing energy services.

Demand-side approach – industrial processes

Chapter 3 of this report sets out the opportunities for reducing energy demand in industry by improving process efficiency and reducing the demand for new materials. Decarbonisation of fuels will also be required. It is difficult to make generic statements about energy use in industry, given the wide range of processes used. Electricity is already dominant in some sectors, notably aluminium and chlorine manufacturing, as well as important sub-sectors such as secondary steel-making. Some additional electrification is possible, for example in relatively low temperature processes such as drying, where heat pumps can provide a more efficient option than fossil fuel technologies.

Similar easy wins are not available in many high temperature process sectors, such as primary steel and cement, and therefore more radical decarbonisation options need to be explored. There is a growing literature (Philibert, 2017; BZE, 2017; ETC, 2018a; ETC 2018b; CCC, 2019), which explore options that go beyond the UK Government’s road maps (BEIS, 2015) and the related actions plans that were published alongside the Clean Growth Strategy (BEIS, 2017b). These have some common elements, including a short-term focus on energy efficiency, with future decarbonisation based on some combination of CCS, hydrogen and biomass.

The longer-term options will require policy intervention to support innovation and to displace the incumbent, fossil fuel intensive processes. There are welcome signs of innovation support under the Industrial Strategy Challenge Fund. However, the road maps and action plans developed in collaboration with industrial stakeholders are too restricted. Their focus is on decarbonising existing processes, with insufficient attention to fundamental changes in demand. This is most obvious in the documents addressing the oil refining sector. These assume a significant continuing role for petroleum products in transport in 2050, which we judge incompatible with global and UK Government energy system decarbonisation goals.

Decarbonisation of production will raise the costs of key materials. These and other changes will change the demand for those materials. Decarbonisation analyses need to include potential new processes and materials with lower energy and carbon intensities. The Government roadmaps include on-site material efficiency options, but exclude demand-side resource efficiency. We believe this is a significant omission. Industrial process energy use is a prime example of where we need to think about ‘what energy is for’, and whether the services provided by the materials and products can be delivered in different, and more sustainable ways. For example, the process and manufacturing emissions involved in making cement can be reduced upstream – by more efficient processes, different fuels and CCS – but also downstream by recycling, new materials and new construction techniques. We recommend that the analyses underpinning the UK industrial roadmaps is extended to include material efficiency options. Existing analysis (see Chapter 3) and future research by CREDS can feed into this.

Demand-side approach – freight transport, shipping and aviation

Chapter 4 of this report sets out the opportunities for changing energy demand through changed patterns of mobility and new passenger road transport technology. Light goods vehicles in urban areas offer some early opportunities for electrification due to the potential for dedicated recharging facilities. Heavy road freight, shipping and aviation are not so amenable to electrification and will require different approaches to decarbonisation.

Electrification of long-distance road freight using batteries has weight and volume penalties. The most widely-considered alternative is hydrogen-powered vehicles, using either internal combustion engines or fuel cells. This raises the issues about large-scale production of hydrogen that are discussed above. However, the filling stations used for liquid transport fuels may be an easier early market for electrolytic hydrogen than gas grid decarbonisation.

Battery operated ships and planes appear technically feasible over short ranges, but these transport modes are principally used for long-range transport. There is interest within the shipping and aviation sectors in use of biofuels. However, the underpinning assumption that long-range transport is the best use of limited bioenergy resources is not supported by current evidence (CCC, 2018a). Moreover, at the altitudes used for most long-distance aviation, any combustion releases emissions that contribute to climate change.

We welcome the commitments in the Clean Growth Strategy to supporting technological innovation for advanced fuels and improved efficiency in road freight, aviation and shipping. These will undoubtedly be necessary to achieve energy policy goals. However, the analysis assumes the continuation of existing trends of growth in long-distance freight transport, driven by increased consumption and trade. As Chapter 4 of this report indicates, demand growth is not inevitable and projections need to be subject to critical review.

Demand-side approach – space and water heating

Chapter 2 of this report sets out the importance of, and scope for, improving the energy performance of UK buildings, in particular by using better insulation and ventilation. It is theoretically possible to reduce the energy demand for space heating to zero. However, this is not practically possible, even with Passivhaus new-build construction, and is inconceivable for the whole UK building stock over the few decades within which the transition to a zero carbon economy has to be achieved. Energy demand reduction for water heating is more difficult to deal with. Decarbonisation of the fuels used for providing heat in buildings is therefore unavoidable if carbon targets are to be met.

The Clean Growth Strategy recognises that decarbonisation of heating is a major and long-term challenge. More recently, Government has published the evidence base on heat decarbonisation (BEIS, 2018). Both reports cover energy sources (e.g. renewable electricity, bioenergy), energy vectors (e.g. electricity, mains gas) and conversion devices (e.g. boilers, heat pumps), but do not always distinguish their roles clearly.

It seems likely that the dominant energy vectors for heating will be electricity, mains gas and district heating (DH). None of these is a priori low carbon, but all can support low carbon sources and their use. Conversion devices at the point of end use will be important. They have to be affordable and socially acceptable if they are to be adopted. Their efficiency has a major impact on overall system efficiency, and therefore the scale and cost of the whole energy system. A critical constraint is the ability to deal with periods of system stress, which are likely to remain associated with high winter demand. There will be a requirement for the energy system to store energy, including over periods much longer than a day. In developing plans for decarbonisation of heat, a whole system analysis is needed of heat options, including the performance of energy conversion devices and energy storage. We recommend that greater attention is given to energy conversion devices and energy storage in the analysis of heat decarbonisation.

There is broad agreement that significant electrification of building heating is very likely to be required for complete decarbonisation. Heat pumps, rather than electric resistance heating, are the efficient means with which this could be delivered. However, heat pumps are not simple replacements for fossil fuel boilers; their effectiveness in retrofit depends on being able to operate heating systems at lower than conventional temperatures. This in turn requires some combination of reduced heat loss, larger radiators, or a shift to continuous heating. Deployment of heat pumps, particularly in retrofit, requires careful design and sizing, and skilled installation (RAPID-HPC, 2017). Expanding the supply chain will take time and is unlikely to happen without Government intervention. We recommend that financial support for heat pump heating systems be continued and that more policy attention be given to the building heating supply chain.

Some early scenarios with high heat pump adoption (e.g. DECC, 2013) overlooked the multiple challenges delivering a systemic change in building heating. In particular, the impact on peak electricity demand of very high levels of electrification is unlikely to be acceptable, and therefore a more diverse mix of energy carriers will be needed (Eyre and Baruah, 2015).

Exemplars of high DH use that are often cited (notably Denmark and Sweden) have been based on an evolving mix of energy sources (Danish Energy Agency, 2017; Werner, 2017). The advantages of DH are its flexibility with respect to sources of heat, its ability to support significant economies of scale in heat conversion and thermal storage, and the fact that it removes technical complexity from dwellings. The UK Government is supporting the expansion of heat networks through the Heat Network Development Unit. These networks require regulation, which has been slow to materialise in the UK, but which is now under consideration (BEIS, 2018b).

However, for DH to play a significant part in the decarbonisation of heat a number of additional measures are needed, including development of the supply chain, reduction of perceived risk and thus financing costs, linking to the availability of low carbon heat sources, and development of models for the effective integration of heat, electricity and gas networks. We recommend BEIS develops a comprehensive strategy for heat, including heat networks, but also other options.

More recently, there has been attention to decarbonising gas, through some combination of biogas and hydrogen. As set out above, there is an ongoing debate about the relative merits of steam methane reforming with CCS and electrolysis for hydrogen production. However, end-use perspectives are equally important. A major proposed benefit of hydrogen is enabling households to retain existing end-use technologies. However, whilst the ability to use existing household appliances has obvious short-term merit, transition to higher levels of hydrogen will almost certainly require new end-user equipment. Much UK analysis (e.g. BEIS 2018; CCC, 2018b; CCC, 2019) has focused on the option of using hydrogen (or biogas) in hybrid heat pumps, in order to avoid meeting peak heat demand solely with electricity. This implies a long-term commitment to burning zero-carbon gas in a boiler, which is a sub-optimal use of a high cost vector. It will be important to explore more efficient options, including combined heat and power and gas-fired heat pumps. Analysis of hydrogen as a heating fuel cannot be separated from its potential value in providing inter-seasonal energy storage. We recommend that ongoing analysis of hydrogen as a heating fuel by both BEIS and the CCC covers questions of end use and storage, as well as production and networks.

Most current analysis (e.g. CCC, 2016) points to early growth in electricity use in areas off the gas grid. It accepts that more research and trials are needed to explore the merits of different options in other locations. Our key message is that decarbonising heat is very different from decarbonising electricity, as it has major implications for energy users. Demand for thermal comfort, building fabric performance, heating technology efficiency and choice of vector are all likely to be important. And they will be the key determinants of the low carbon fuels used.

Implications for policy

In our chapters relating to demand reduction and flexibility, we set out specific short- term actions for Government, along with some longer-term challenges requiring further research. For decarbonisation of end-use fuels, the agenda is less well-developed, there are more unknowns, and therefore we place greater emphasis on research. Some decisions, notably strategic investment in gas, electricity and heat networks, imply very substantial infrastructure costs, and therefore the value of information is potentially high in helping to avoid stranded investment and to improve our knowledge of the different options for decarbonisation.

However, this is not an excuse for inaction. Early action is required, not just to deliver quick wins, but also to develop learning, skills and supply chains. Basic research is still needed, but there are already options in transport, buildings and industry where demonstration, trials and deployment are appropriate. These will be some of the key technologies of the low carbon transition. Developing a UK industrial strength in low carbon technology requires investment in these areas. The UK Government announcement in December 2018 of a ‘net-zero carbon cluster’ is a welcome development. We recommend that Government develops and maintains a comprehensive programme of innovation support for decarbonisation of difficult sectors.

In the short to medium term, many of the options set out above are unlikely to be cost effective against current technologies. To make this the test of financial support would be a strategic mistake. Whether a new option can out-perform the gas boiler, the diesel engine or the blast furnace in the high carbon economy is irrelevant in the face of the Paris Agreement. The right question is whether a technology or practice has a significant chance of forming part of an approach to long-term decarbonisation that is likely to be socially acceptable, and, if it does, how to support it on its pathway to widespread use.

Changes to technologies for buildings, vehicles and industrial processes will be important. However, as we have emphasised, there is every reason to expect very significant changes in user practices and commercial business models, as well as supply infrastructure as these sectors decarbonise. We recommend that changing practices among end users and throughout supply chains should be more central to the decarbonisation innovation agenda.

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