The Labour government has a unique chance to transform the UK's energy landscape – but it cannot afford to overlook existing inefficiencies, writes Jonathan Maxwell
Since 2016, the UK's energy policy has stagnated, plagued by inconsistent market incentives and insufficient planning for new energy capacity.
The reserve margin – the buffer between supply and demand – remains perilously tight, storage capacity has been neglected and the grid has not been adequately upgraded to accommodate renewable energy on a larger scale.
The newly announced partnership between the soon-to-be Great British Energy and the Crown Estate offers huge promise for the UK's gloomy energy generation, with enough land to produce 30GW of energy expected to be leased under the agreement.
The UK has great potential for distributed and decentralised energy. It operates 25% of Europe's offshore wind resource – around 10GW – and is second only to China with the ambition for up to 40GW by 2030. This new generation might be approved by 2030 but much of it will take another decade to produce power. There is also an estimated 30GW potential capacity of combined heat and power (CHP) and at least 10GW of distributed solar – on paper, this is enough energy, correctly balanced, to supply half the UK economy.
Energy generation is having its moment in the sun, and rightly so, but merely feeding more energy into an inefficient system cannot be the only solution despite it being a headline one.
Recognising the root of the problem
A paradigm shift is needed in the UK that recognises the importance of energy efficiency just as much as energy generation.
First, the hard reality is that electricity is still less than 20% of the UK's final energy demand, so greening the current electricity system is important but, at this stage, will only get us so far.
It is also staggering, but rarely discussed, that some 58% of the primary energy, whether brown or green, that is used to make electricity in the UK is lost through conversion, generation, transmission and distribution processes before even reaching the end user, where more is wasted.
The UK's energy crisis is characterised by the trilemma of cost, climate and security. The inefficiencies of the current energy system, compounded by its carbon and financial costs, strain public services and finances – conversion, generation, transmission and distribution losses alone cost the UK over £20 billion annually. These losses are not just a drain on resources; they represent a significant missed opportunity for economic efficiency and growth.
With this in mind, it is crucial that long-term policy is complemented by immediate, practical solutions that address the inefficiency plaguing the UK's current energy system.
Efficiency is key
The partnership between GBE and the Crown Estate is positive news for the wider energy industry and revives hopes for the UK's ability to generate renewable energy at scale, but the lack of attention paid to energy efficiency outside of the Warm Homes Plan is alarming.
Labour should seek to mandate energy efficiency targets by enforcing progressive reductions in energy consumption per unit of GDP output, matching or exceeding international standards. At minimum, this should match China's initiative to improve efficiency and productivity by at least 4% a year, or 20% every five years, and should beat Europe's mandate to reduce gas use by 15% and electricity use by 5%.
As the UK's largest institutional energy user, the government must also lead by example, overhauling energy supply and usage in sectors like health, education, transport and defence to set a powerful precedent.
A 2019 report by the UK Parliament's Business, Energy and Industrial Strategy Committee found that savings of around £1.4 billion per annum could be achieved in the NHS through cost-effective investments in energy efficiency – lighting, insulation, controls – and low-carbon heat.
Attracting private capital
The stagnation of the UK's energy policy has been well documented, particularly by an ambitious private sector with deep pockets.
Well-designed policy can attract project development and private investment in the UK at scale to deliver large and measurable results in the short term.
Policymakers have a golden opportunity to secure the investment needed for a clean energy revolution by focusing on energy productivity, competitiveness and sustainable growth through efficient resource use.
Big headlines and power politics remain focused on utility scale, centralised grid-connected renewable power plants and unready technologies.
While the Crown Estate collaboration brings the backing of a significant institution and obvious benefits to the renewable energy table, even more practical and immediate solutions to reduce the UK's carbon emissions are primed and ready to be implemented by the Labour government.
By Jonathan Maxwell, Founder and CEO of Sustainable Development Capital LLP
