25 October 2012

E2B Pulse - Exclusive: Industrial and economic policy working together to create growth

E2B Pulse - Exclusive: Industrial and economic policy working together to create growth


A practical approach to affordable, secure and sustainable energy production can help develop UK economic development. Andrew Haslett, Director of Strategy Development at the Energy Technologies Institute (ETI), explains why.

The UK’s CO2 reductions are ambitious and rightly so but, to deliver them, we need to develop new energy technologies.   Any system based on current technology however will simply be too expensive to implement. New facilities must therefore balance the need to decarbonise with reduced costs for both industry and consumers.

Tackling affordability, sustainability and security relies on taking a pragmatic approach, finding solutions that work for end users and investors.  The electricity market will require, we estimate, £110billion in investment between now and 2020; and unlocking project funding from the private sector will depend on creating commercial confidence and demonstrating economic viability.

Within this challenge lies economic opportunity.  The world is transitioning to a low-carbon future and, if we recognise energy policy as a core component of industrial and economic policy, we have the potential to create supply chains and expertise with international application.

The Way forward – National Energy System modelling

The ETI’s strategic decisions and investments are underpinned by our internationally peer-reviewed Energy System Modelling Environment (ESME) modelling tool.  ESME is a national design tool that links heat, power, transport and infrastructure analysing different technologies and assessing the impact they might have on our energy system and finding the least-cost route to meeting future energy demands with 2050 as the end destination. By continuingly updating with inputs from our projects, as well as industrial and public sector members, ESME is also used by our members to inform policy and support technology development.

What does ESME tell us?

The ETI – through ESME - has identified what we see as the six big priority development areas for any future UK energy system.
These are:

• Efficiency – demand reduction and smarter use of energy in our businesses and homes makes a contribution under all emission reduction scenarios.
• Nuclear – while it is possible to create a future energy system capable of meeting our 2050 emissions reductions targets without nuclear energy, it will come with too high a price tag to be realistic – therefore we see an economic case for new nuclear build.
• Carbon Capture & Storage (CCS) – a key technology lever given its potential wide application particularly when combined with bioenergy.  However, it has a long development time and requires an early start.
• Bioenergy – has major potential to create negative emissions via CCS and might provide a range of energy conversion routes.
• Gas for heat & transport – has the potential to play a material role as a 2050 destination fuel including power, space heating, transport and process heat applications
• Offshore Renewables – particularly wind which is a marginal technology but provides the best hedging option if any of the above identified technologies do not proceed to plan, but cost reduction is critical.

It is not a case of one over another - a balanced combination of all six is needed to achieve our goals. However, if we are to capitalise on these opportunities, time is of the essence.  Many of the technologies we believe are vital to the UK’s energy future have long lead times for development and we are right to be impatient for change that will bring their commercial deployment forward.

Both 2020 and 2050 create an investment challenge but also economic opportunities. The economic rewards of large scale investment in the upgrade of the UK energy system are potentially huge and, at a time when our industry in other sectors is struggling, we must embrace new energy technologies for economic as well as scientific reasons.  Putting energy at the heart of our industrial policy is a bold move.  But, by the time 2050 arrives, it will be a move we will need to have taken. 

The ETI is a public-private partnership between energy and engineering companies BP, Caterpillar, EDF, E.ON, Rolls-Royce & Shell and the UK Government. Click here to find out more.


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