This post is by Sivapriya Mothilal Bhagavathy of the University of Oxford, Samantha Crichton of the Sustainable Energy Association, Melanie Rohse of the Global Sustainability Institute and Daisy Goaman of the Centre for Sustainable Energy.
It has been ten years since the Climate Change Act, and the UK has made significant progress in reducing emissions from the power sector, dropping them by nearly 60 per cent on 2008 levels. While five years ago fossil fuels contributed nearly two thirds of the UK’s power, by August 2018 over 60 per cent came from zero carbon sources. This is an excellent example of what clear goals, well designed policies and technological innovation can achieve.
But, to meet existing climate commitments, the job to decarbonise energy is far from finished. Not only will the power sector need to continue on its decarbonisation trajectory, but we also urgently need to decarbonise how we heat our homes, invest in energy efficiency to reduce overall energy demand and increase the deployment of low carbon cars.
The good news is that, aside from avoiding the devastating impacts of climate change, cutting carbon brings a wealth of benefits, including lower bills, better insulated homes, cleaner air and jobs in low carbon industries. But who is really benefiting? There is a big question around how to make sure these advantages are shared fairly right across society.
Benefits and costs of the low carbon transition aren’t being distributed evenly
The way energy policy is funded, via consumers’ energy bills, is highly regressive. On average, the poorest households spend around ten per of their income on energy while the richest households only pay three per cent. This is regardless of whether households are actively taking part in the low carbon transition themselves. For example, the uptake of solar PV installations is greater in more affluent households. Similarly, Energy Company Obligation (ECO) schemes, which encourage home energy efficiency, have not appropriately targeted those most in need of insulation, with the IPPR estimating that only 30 per cent of ECO funds are likely to be spent on fuel poor consumers.
The uneven distribution of benefits is also evident on a regional scale. A recent study from Imperial College has shown that some parts of the country are further ahead in terms of access to, and therefore the benefits from, low carbon technologies, while others run the risk of being left behind. This is largely as a result of different levels of national and local government investment, building efficiency and household incomes.
Finally, the UK energy market is outdated. Innovation in low carbon technologies is resulting in a more distributed energy system, but it is generally affluent consumers who are reaping the benefits, opting for small scale technologies to generate and store their own energy and using electric vehicles. Given how the current market is designed, growth in these new forms of energy generation and use is likely to challenge the way in which costs for the grid, flexibility and back up are covered, as BEIS Secretary of State Greg Clark highlighted recently in his speech.
What would a fairer system look like?
Various options are on the table to share the benefits and costs of the low carbon transition more fairly, but it will require a fundamental rethink of the UK’s energy policy and market design.
Research by UKERC suggests alternative forms of funding could place energy policy costs for decarbonisation on businesses or recover them through general taxation. Other market-based solutions are also being explored. The emergence of smart home energy management systems means energy could be offered as a part of a bundle of services rather than as a product itself. Non-commercial solutions, such as community energy and energy co-operatives, may also allow more people to benefit from cheap, low carbon energy.
The possibilities for a fair low carbon transition were discussed in more detail with an expert panel at an event developed by the authors of this blog and hosted by Green Alliance and UKERC, on Thursday 6 December.