How Alok Sharma can put Britain on course to reach net zero emissions in a post-Covid world

Linda J. Dodson

Ministers can rightly toast success in cutting carbon emissions from making electricity. Coal, which generated 70pc of UK electricity in 1990, is almost out of the picture, while wind, solar and hydropower generated 26.5pc of electricity in 2019.

But the next steps, cutting emissions from transport and heating, are arguably tougher. Sharma’s energy white paper is likely to contain measures to encourage the development of hydrogen as a fuel, including as a replacement for gas-fired boilers alongside heat pumps.

The hydrogen solution

It has many critics, but if hydrogen is going to be widely used, support is needed to bring down the cost of hydrogen generated through electrolysis (“green hydrogen”), and develop carbon capture to mitigate emissions from making it from natural gas (“blue hydrogen”). Europe has put a focus on hydrogen and the UK is “unlikely to want to lag behind”, according to one senior industry adviser.

KPMG’s Virley believes that the costs of green hydrogen could fall quickly if the right support is put in place, akin to the guaranteed electricity prices that helped wind power.

“With the right support, green hydrogen could be cheaper than blue hydrogen within a decade,” he says. “The cost reductions required are very achievable and similar to those seen for solar or offshore wind.”

Industry beasts are already involved in hydrogen, eyeing a market both for their gas and for their electricity.

Off the coast of the Netherlands, Shell – the company that doesn’t want to be known as an oil business anymore – is developing a wind farm that will also produce green hydrogen. Sinead Lynch, its UK country chair, is also co-chair of the Government’s Hydrogen Advisory Council, as an independent industry representative, alongside energy minister Kwasi Kwarteng.

Bearing the cost

While necessary to encourage investment in uncertain technologies, new subsidies are likely to stoke controversy about dumping the costs of the shift to a low-carbon economy on to bill payers. A new levy is already under consultation to be added to gas bills to help pay for biomethane.

“They have to be very careful,” says one industry source. “Everyone is up for this but it needs to be fair.”

Ministers have already been burned by criticism over the £92.50 per MwH guaranteed electricity price granted to EDF and CGN, the French and Chinese developers of the Hinkley Point C nuclear power station taking shape on the Somerset coast.

Yet politicians have now been wrestling for so long with how to encourage investment into new nuclear that they risk deterring any, leaving a huge gap in low-carbon power as the ageing nuclear fleet shuts down. Hitachi walked away from a mothballed potential Wylfa nuclear power plant in Anglesey last month, while EDF is pressing for answers on support for its next planned project with CGN, Sizewell C in Suffolk. Sharma is bound to give a signal.

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