unpacking the sixth carbon budget the transition for energy

1

14th December 2020

Unpacking the Sixth Carbon Budget –

The transition for energy

Professor Keith Bell (member of the Climate Change Committee)

Owen Bellamy, Dr David Joffe (CCC Secretariat)

Agenda

1. Our approach

Outline of methodological approach to the Sixth

Carbon Budget

2. Our recommended path

Emission pathways, costs and co-impacts, and policy

recommendations

3

Chapter 1

Our approach

4

Our approachThree exploratory scenarios to reach Net Zero by 2050

5

Further behaviour change

High behaviour change

Widespread Engagement

HeadwindsWidespread Innovation

Further innovation

High innovation

Our approach

Our approachOne highly optimistic scenario with success on infrastructure, innovation, societal and behavioural change

6




Tailwinds


Further innovation

High innovation

Our approach

Our approachA balanced pathway to keep options open

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Tailwinds


Balanced Sixth Carbon Budget

Pathway

Further innovation

High innovation

Our approach

Our approachConsistent with the Paris Agreement

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Tailwinds

HeadwindsWidespread innovation

Balanced Sixth Carbon Budget

Pathway

Further innovation

High innovation

Climate science and international circumstances

• Need deep reductions globally to 2030 to keep

1.5°C in play

• Paris demands ‘highest possible ambition’

• UK leadership matters as President of COP26

• Equity arguments reinforce need for strong UK

action

Our approach

0

500

1,000

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4,500

5,000

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1990 1995 2000 2005 2010 2015 2020 2025 2030 2035 2040 2045 2050

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ea

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rbo

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(MtC

O2 e

)

Em

issi

on

s in

clu

din

g IA

S

(MtC

O2e

/ye

ar)

The Sixth Carbon Budget Headroom for IAS emissions

Past carbon budgets Active legislated carbon budgets

Historical emissions The Balanced Net Zero Pathway

Our recommended pathThe recommended sixth carbon budget and 2030 NDC

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2030 NDCAt least 68%

2035 Emissions Reduction

78%

Notes:

Emissions shown including emissions from international

aviation and shipping (IAS) and on an AR5 basis,

including peatlands. Adjustments for IAS emissions to

carbon budgets 1-3 based on historical IAS emissions

data; adjustments to carbon budgets 4 and 5 based

on IAS emissions under the Balanced Net Zero

Pathway.

Source:

BEIS (2020) Provisional UK greenhouse gas emissions

national statistics 2019; CCC analysis.

Recommendations

Chapter 2

Our recommended path

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Changes in energy demand

Fossil fuels (TWh)

11What changes will we see on the balanced pathway?

Fossil fuels are largely phased out

• Demand falls significantly to 2050 for oil (-85%) and

natural gas (-70%)

• Petroleum is mainly restricted to the aviation sector,

• Natural gas use is limited to combustion with CCS

for power generation and industrial processes and

phased out of use in buildings.

0

200

400

600

800

1000

Oil

Removals Surface transport Aviation Shipping

Res buildings Non-res buildings Electricity supply Agriculture

LULUCF sources LULUCF sinks M&C Fuel supply

Waste F-gases Total

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200

400

600

800

1000

2020 2025 2030 2035 2040 2045 2050

Ga

s

Source: CCC Analysis.

Hydrogen supply and demand

By 2050 the hydrogen economy is comparable in scale to existing electricity use

12What changes will we see on the balanced pathway?

Source: CCC Analysis.

Demand for electricity

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Changes from now to 2050

What changes will we see on the balanced pathway?

• Current demand for electricity is around 300 TWh

per year. Under the Balanced Pathway that

increases by 50% to 2035 and doubles out to 2050.

• The Balanced Pathway has an increase in

electricity demand from buildings, manufacturing

and construction as those sectors partially electrify.

• Significant new sources of electricity demand arise

from electrification of surface transport, and for the

production of hydrogen using zero-carbon

electricity.

Source: CCC Analysis

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100

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800

2020 2025 2030 2035 2040 2045 2050

TWh

Residential buildings Non-residential buildings

Manufacturing & construction Surface transport

Fuel Supply Other

Electrolysis

Electricity generation mix (Balanced Pathway)

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What changes will we see on the balanced pathway?

Key features of the Balanced Pathway include:

• Phasing-out of unabated gas generation by 2035

• An expansion of variable renewables, so that it

provides 80% of generation by 2050

• Increasing use of surplus generation to produce

zero-carbon hydrogen

• New sources of dispatchable low-carbon

generation (e.g. gas CCS and/or hydrogen) to

balance variable weather-dependent renewables

• An increasingly flexible system, including from

demand-side management, storage, hydrogen

production, and interconnection


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2020 2025 2030 2035 2040 2045 2050

Ge

ne

ratio

n

(TW

he

)

Other Dispatchable low-carbon generation

Firm power Electricity for hydrogen production

Variable renewables Unabated fossil fuel generation

Emissions pathways for electricity generation

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What changes will we see across the scenarios?

• Emissions from electricity generation fell by 64%

over the last decade, as coal was replaced by

renewables and gas.

• To fully decarbonise electricity generation, the UK

will need to move away from unabated gas,

replacing that with additional variable renewables,

and low-carbon dispatchable generation (e.g. gas

CCS and hydrogen) in the 2020s and 2030s.

• In the 2040s the challenge is to continue deploying

low-carbon generation to meet new additional

electricity demands in a low-carbon way.


0

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2010 2020 2030 2040 2050

MtC

O2e

Outturn Balanced Pathway

Headwinds Widespread Engagement

Widespread Innovation Tailwinds

Role of hydrogen in electricity generation

Role of hydrogen 16

A source of generation and a potential demand

Hydrogen has a dual role to play in decarbonising electricity,

as it can be both a source of low-carbon generation and a

potential new demand for electricity.

• Hydrogen could play a crucial role in delivering flexible

low-carbon generation. By adjusting their output in a short

period of time, hydrogen plants can ensure security of

supply with low-carbon generation.

• Hydrogen production. Hydrogen burned in gas plants can

be produced via electrolysis, which uses electricity as an

energy input, or methane reformation that relies on CCS.

• In the 2020s, methane reformers with CCS are more likely

to play a role in providing hydrogen. That is because the

cost of electricity would need to be as low as £10/MWh for

electrolysis to be cost-competitive with methane reformers

that could cost £40/MWh of hydrogen.

• From the 2030s, as renewables become a larger share of

the generation mix, there could be surplus generation

when demand is low but renewable output is high. This

surplus electricity could be used to produce hydrogen at

costs competitive with methane reformation with CCS,

albeit at volumes constrained by availability of these

surpluses.

• In 2050, the Balanced Pathway has 195 TWh of domestic

production of hydrogen evenly split between electrolysis

and methane reformation with CCS.

Costs

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Variable renewables are the cheapest form of generation

Costs


Costs of generation technologies in 2050 (£/MWh)

Balanced Pathway

HeadwindsWidespread Engagement

Widespread Innovation

Tailwinds

Unabated gas plant (excluding carbon price) 60

Variable renewables 40 25

Firm power 85 105

Dispatchable low-carbon power 80-185

Source: CCC analysis based on BEIS (2020) Electricity Generation Costs, CCC (2018) Hydrogen Review, Wood Group (2018) Assessing the Cost

Reduction Potential and Competitiveness of Novel (Next Generation) UK Carbon Capture Technology.

Notes: Costs in 2019 prices. Costs based on a central gas price scenario. Variable renewables include wind and solar. Firm power includes

nuclear. Dispatchable low-carbon generation includes gas CCS, BECCS, and hydrogen.

Costs, impacts, and co-benefits

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The Balanced Pathway is cost-saving by 2050

Costs under the balanced pathway

• The Balanced Pathway is cost-saving by 2050, as

the lower operational costs of low-carbon

technologies more than outweighs the additional

investment required.

• Additional investment requirements peak by the

mid-2030s, and reduce thereafter as costs of low-

carbon technologies fall.

• Investment in low-carbon generation will bring a

range of co-benefits including improved air quality,

lower electricity prices, and opportunities for

industry and a just transition.


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-15

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-5

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2020 2025 2030 2035 2040 2045 2050£b

n

Capital expenditure Operational expenditure

Key policy recommendations

Recommendations 19

Decarbonising electricity generation by 2035

The Committee’s key recommendations:

• Deploy low-carbon generation at scale, including variable

renewables (e.g. 40 GW of installed offshore wind

capacity by 2030 and sustaining that build rate to support

deployment of up to 140 GW by 2050) and dispatchable

and flexible generation (e.g. at least 50 TWh of gas CCS

and/or hydrogen by 2035) that can balance a system

driven by renewables at low emissions.

• Develop an increasingly flexible electricity system,

including from demand-side management (with 20% of

demand being flexible in 2035), storage, hydrogen

production, and interconnection.

• Phase-out unabated gas by 2035. By 2021 commit to

phasing-out unabated gas by 2035 and publish a

comprehensive long-term strategy on how to achieve

that. By 2025 ensure new gas plants are properly CCS

and/or hydrogen-ready. By 2030 no new unabated gas

plants should be built and the Government should

regulate for a firm pathway to zero unabated gas by 2035,

subject to ensuring security of supply.

• Ensure networks are ready, by delivering plans to ensure

they can accommodate future demand levels, and

developing a strategy to coordinate interconnectors and

offshore networks for wind farms and their connections to

the onshore network.

• Develop a coherent market framework for Net Zero,

publishing a clear long-term strategy as soon as possible,

and certainly before 2025, on market design for a fully

decarbonised electricity system.

Summary of advice on electricity generation

20Summary of electricity generation


Dispatchable low-carbon (%)

2020 2030 2040 20502035D

em

an

d2025

Un

ab

ate

d g

as

ph

ase

ou

t2045

Demand (TWh) ~300 610

Flexible demand (TWh) 13515

2021Publish a comprehensive

long-term strategy for

phasing-out unabated

gas.

2025Market design strategy.

New gas plants to be

properly CCS and/or

hydrogen ready.

2030Regulate for a 2035

unabated gas phase-out.

No new-build unabated

gas plants from 2030.

040

Ge

ne

ratio

n

100

460

100% clean electricity from 2035

Widespread electrification from 2030

Increasing potential, inc H2 production

70 80Deploy at scale Deploy at scale to meet new demands

0 15 10Develop markets for gas CCS and H2 Deploy at scale from mid-late 2020s

25

Unabated gas share (%)

Renewables share (%)

Dispatch. low-carbon (%)

Un

ab

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as

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ase

-ou

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Policy recommendations for hydrogen supply

21Recommendations

Strategy

• Focus hydrogen demand on areas where that cannot feasibly decarbonise without it.

• Pursue proven solutions (e.g. electrification) in the 2020s, in parallel with developing hydrogen.

• Set out vision for contributions of hydrogen production from different routes to 2035.

Demonstration / near-term deployment in supply

• Get on with low-carbon production to establish low-carbon hydrogen supply chains.

• Blue hydrogen. Deploy fossil gas CCS early to prove that it can deliver suitable emissions reductions vs. fossil gas (i.e. at least 95% CO₂ capture, 85% lifecycle GHG savings).

• Gasification. Support commercialisation of biomass gasification with an aim to establish hydrogen production from bioenergy with CCS.

• Electrolysis. An RD&D programme is required to improve cost & performance of electrolysers.

Incentives

• Ensure low-carbon hydrogen capacity is incentivised to contribute emissions reductions(including mixing with fossil gas) at least for power generation, industrial clusters & grid injection.

• Ensure incentives for hydrogen use, together with electricity pricing, don’t bias solutions towards hydrogen where electrification is competitive.

• Avoid incentivising electrolysis based on (non-curtailed) grid electricity, as likely to push up emissions – focus on curtailed generation and dedicated renewable electrolysis.

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Contact us

@theCCCuk

unpacking the sixth carbon budget the transition for energy

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