Five things we learned from DECC’s annual energy statement
Simon Evans
11.07.14Yesterday, energy and climate secretary Ed Davey made his annual energy statement to parliament. It’s a chance for the Department for Energy and Climate Change (DECC) to tell us all how its policies are progressing, from decarbonising the UK to securing supplies and trying to keep down energy bills.
There’s a mass of information in the report, but you probably don’t have time to read it. So here are five things we learned from DECC’s annual energy statement.
The UK is expected to miss its fourth carbon budget
The UK has set legally binding targets to cut emissions by 80 per cent of 1990 levels in 2050. A series of intermediate five-year carbon budgets mark out the path to that longer-term goal.
DECC’s projections show the UK is on track to meet its second and third carbon budgets, spanning the years out to 2022. In fact the UK is expected to more than meet those budgets. And it already met its first carbon budget for 2008-2012. Good news all round, you might think.
Except the projections also show the UK missing its fourth carbon budget for 2023-2027 as the graph below shows (the columns breaching the black budget limit line on the right hand side). The government’s advisory Committee on Climate Change said the fourth budget was at risk over the summer, so the conclusion isn’t a surprise. But it’s so important it bears repeating.
Source: DECC Annual Energy Statement 2014
The mid 2020s might seem like a long way away but decisions made now – building a new fossil-fired power station, for instance – will have an impact on emissions for years to come. So the longer the UK remains off course, the harder it will become to get back on track.
DECC says the gap between projected emissions and the fourth budget cap is 133 million tonnes of carbon dioxide equivalent. It says it has ideas up its sleeve to close the gap, they just haven’t been fully developed yet.
DECC is moderating the rhetoric on shale gas
The annual energy statement repeats the government line on the benefits of developing the UK’s shale resources through fracking. It repeats a claim that the UK shale industry could create jobs, even though new research suggests this sort of claim should be taken with a pinch of salt.
Source: DECC Annual Energy Statement 2014
But DECC specifically avoids claiming that UK shale could cut energy bills, an argument that has been made enthusiastically in the past by government figures from the prime minister down. Instead, DECC argues UK shale gas could insulate the UK from volatile global prices.
The annual energy statement later qualifies the shale jobs claim, saying there is the potential for 64,000 jobs to be “supported”. This is an acknowledgement that the evidence around long-term job creation through energy policy initiatives is weak.
Use of the word “supported” is a way of saying that the total number of jobs in the UK might – or might not – actually be increased by pro-shale policy. That’s why DECC’s statement focuses instead on the potential to provide highly skilled, high quality jobs.
Source: DECC Annual Energy Statement 2014
The annual statement also notes that the award of new licences to explore for onshore oil and gas will be announced in “early 2015”. Firms were invited to apply for licences over the summer.
Energy efficiency policies can be effective
DECC’s statement says that average UK homes now uses 25 per cent less energy than they did in 2004, just ten years ago. DECC says that’s equivalent to a £300 annual energy bill saving in today’s prices. There is some uncertainty around exactly why home energy use has fallen so far and so fast, but it is likely that energy efficiency policies have played a big role.
The rise in homes with highly efficient condensing gas boilers for home heating, shown in the graph below, is one example of the energy efficiency that are being made in the UK. Nearly half the UK’s 26 million homes now have these more efficient models.
Source: DECC Annual Energy Statement 2014
DECC points out that new homes built today will use 30 per cent less energy than new homes built in 2010. That’s down to rules requiring ever-increasing levels of home insulation and more efficient heating systems.
The effectiveness of energy efficiency policy as a way to reduce emissions and energy use is frequently questioned. So it’s important to note that it has had real impacts in the UK. Energy efficiency will continue to play a part in government plans to limit increasing energy bills.
The UK has become an EU leader on renewables investment
More than a quarter of EU investment in renewables was made in the UK in 2013, DECC says. This is a large increase on the UK’s share of renewables investment, as the chart below shows. Five years ago the UK attracted less than a 10 per cent share.
Source: DECC Annual Energy Statement 2014
Not all of the increase is down to growing investment in the UK, however. Some of it comes down to other countries cutting back on new renewables, with wind and solar subsidies being cut back severely in places like Italy, Spain and even Germany.
The UK needs all the renewables investment it can get because it remains a very long way off its 2020 target to get 15 per cent of its energy from renewables. The chart below shows that renewables provided slightly more than 5 per cent of UK energy needs in 2013, leaving a huge gap to close before 2020.
Source: DECC Annual Energy Statement 2014
DECC expects offshore wind to provide a big part of the additional renewable electricity capacity the UK needs to close the gap, as you can see in the table below. It shows investment in onshore wind dropping away, and money for biomass energy levelling off. Solar’s growth is expected to continue, however.
Source: DECC Annual Energy Statement 2014
The average street now has two solar homes
The expansion of UK solar in recent years has been pretty staggering, growing by 60 per cent year on year in 2013. DECC says the sector is aiming to grow from 2.7 gigawatts of capacity in 2013 to 11 or 12 gigawatts in 2020. More recent data from DECC shows solar capacity had already reached 4.3 gigawatts by the end of September this year.
There are now around 600,000 UK homes claiming government feed-in tariff subsidies for having solar panels on their roofs, as the chart below shows.
Source: DECC Annual Energy Statement 2014
That means roughly one in every 43 UK homes has installed solar panels. If an average street has 100 houses then it would have two solar roofs. If your street doesn’t have one yet, it probably will soon.
Conclusion
Our five learnings barely scratch the surface of the annual energy statement. They do give a snapshot of how DECC is doing, however. There has been progress on energy efficiency and renewables while government retains high hopes for fracking. But despite all that, decarbonisation remains a challenging long-term prospect.