4Heat and transport: beyond 2020
43.We were asked by stakeholders to look not only at short-term policies to meet the 2020 targets, but also at renewable energy in the longer run—particularly given the Government’s present actions will help shape the UK’s future options. Without fossil fuels, heat and transport will likely depend on some combination of bioenergy and electrification; we consider each in turn.
Bioenergy
44.Bioenergy is an umbrella term for renewable natural material—such as plant material and animal waste—used for electricity, heat and transport fuel. It is usually called biomass when solid, biofuel when liquid and biogas when gaseous. Biomass—burned for heat and electricity—includes wood, crops and various wastes. Current or ‘first-generation’ biofuels, such as ethanol and biodiesel, are produced from sugar, starch and plant oils; new biofuels from other sources are under development and termed ‘advanced biofuels’. Biogas includes biomethane, obtained through anaerobic digestion of plant matter.108 These forms of bioenergy together account for 70.72% of the UK’s renewable energy across electricity, heat and transport. 109
Figure 3
45.There are concerns about bioenergy’s carbon footprint and a consequent question: Is bioenergy a transitional fuel until heat and transport are electrified, or a permanent component of a low-carbon energy mix? We were advised, at our informal roundtable meeting in May, that bioenergy combustion emits no net carbon, because greenhouse gases released are equal to those that were absorbed in growing the fuel, but that ancillary processes—such as drying and transporting bioenergy—may emit CO2 (though at low levels compared to fossil fuels). There is evidence linking fertiliser use for biofuel production with nitrous oxide emissions.110 Most significantly, assigning land to energy (rather than food) production can necessitate agricultural development elsewhere, at a potentially-high carbon cost: this is called ‘indirect land-use change’ (ILUC). The Government’s UK Bioenergy Strategy notes:
ILUC emissions are inherently uncertain. The vast majority of studies have however concluded that ILUC leads to increased greenhouse gas emissions for biofuels produced from conventional crops. Not all feedstocks have the same ILUC impacts but when ILUC is considered, some biofuels can have greater carbon impacts than fossil fuel alternatives.111
The CCC estimates that land-use change, including ILUC, “would lead to a reduction in GHG savings of UK biofuels from 70% to just over 50% in 2014/15”.112
46.Biofuel sustainability has further issues. Greenpeace claimed “it is now well established that the time lag between emissions from the burning process and sequestration of emissions through growing new biomass can take decades—or, in exceptional circumstances, over a century”:113 this would render biofuels less helpful to climate-change mitigation as time passes. In transport, IRENA argues “liquid biofuels can quickly reach the limits of sustainable production” and thus “the sector must shift to electric-based technologies”.114 UKERC noted “limits on the production of sustainable bioenergy … even more so for indigenous UK bioenergy”: as bioenergy can be grown for electricity, heat and transport, “it should be used where it is most cost-effective in assisting decarbonisation”.115
47.However, there are benefits to biofuels. UKERC noted limiting global temperature rise to 1.5°C “will require, in the long term, the use of negative emissions technologies, of which the best-studied is bioenergy carbon capture and storage (BECCS)”.116 The NFU pointed out “biofuels tend to replace the most marginal and high-carbon liquid fossil fuels”.117 Dr Skorupska contended “developing biomass heat actually incentivises and benefits our forests, bringing in the undermanaged forests”.118 Bioenergy production has animal-feed by-products—Dr Jonathan Scurlock, Chief Advisor on Renewable Energy and Climate Change at the NFU, mentioned “we have a deficit in quality animal feeds”.119
48.The Government has introduced sustainability criteria for biomass under the RHI and biofuels under the RTFO.120 Biomass in the RHI must be “an approved sustainable fuel from a supplier listed on the Biomass Suppliers List”121 and represent 60% lifecycle GHG savings against the EU fossil fuel average.122 Biofuels must achieve 35% GHG savings (rising to 50% in 2017) to qualify under the RTFO.123 There are rules governing timber sustainability,124 and other biofuels cannot be grown on land with high biodiversity value or carbon stock.125 We welcome these standards, and believe that bioenergy compliant with them improves on fossil-fuel alternatives. However, they cannot address the full gamut of environmental issues for bioenergy—particularly ILUC. The Government must continue to balance the benefits and harms of bioenergy.
49. The Government’s position is that “alongside electrification, bioenergy has a role to play in the decarbonisation of all sectors”.126 The LCVP stated “because electrification will take time and may not be effective in all transport sectors, the [Transport] Task Force agreed that there will be an opportunity for the foreseeable future for sustainable biofuels to play a role”.127 UKERC agreed that in the long term “the diversity of heat and transport demands renders electricity unlikely to be applicable in all cases, and therefore other energy vectors also merit consideration—these include heat networks, hydrogen and direct use of biofuels”.128
50.Bioenergy has an important role in the UK’s future energy mix: it can decarbonise sectors and niches that electrification cannot, and delivers substantial carbon reductions under good conditions. Nevertheless, unchecked bioenergy expansion risks substantial CO2 emissions. This means that electrification is likely to be the preferred option where possible.
51.Clarity on the carbon footprint of bioenergy use and expected future levels of bioenergy is crucial to the UK’s long-term decarbonisation. The Government must review its published Bioenergy Strategy in 2017.
The crop cap
52.The EU’s 2015 Indirect Land-Use Change Directive makes significant changes regarding land use. It introduces a ‘crop cap’: no Member State’s share of biofuels from food crops can exceed 7% of transport energy.129 The LCVP argued “if the government wishes to avoid a significant increase in crop-based biodiesel, it is likely that a crop cap would need to be introduced”.130 Member states must comply with the Directive by September 2017.131
53.The Directive has not yet been transposed into UK law, but the Government has proposed a more stringent crop cap, at 1.5%.132 Andrew Jones MP explained “I am clear that there have been some problems with indirect land use, and I do not want to see this”.133 Conversely, the REA “believes [a 1.5% crop cap] is over cautious and that a cap nearer the recommendation in the ILUC Directive should be set”.134 More forthright, British Sugar and Vivergo claimed in event of a 1.5% crop cap “bioethanol would be squeezed out and the UK industry would collapse”.135 Valero Energy, another bioethanol producer, recommended the UK accept the EU’s 7% level so as to “not be disadvantaged against other member states”.136
54.Setting the crop cap is a balancing act: 7% may be too high to avoid significant indirect land-use change, but 1.5% may be too low to achieve the 2020 transport target. The Government’s reforms to the Renewable Transport Fuel Obligation must find the appropriate compromise.
Advanced biofuels
55.So-called ‘advanced biofuels’ avoid indirect land-use change:
Advanced biofuels, such as those made from wastes and algae, provide high greenhouse gas emission savings with a low risk of causing indirect land-use change, and do not compete directly for agricultural land for the food and feed markets.137
The ILUC Directive sets an optional 0.5% target for advanced biofuels in transport.138 British Sugar and Vivergo wanted this target implemented in the UK.139 However, UKPIA contended “we do not see any evidence [advanced biofuels] will be available in sufficient commercial quantities across the EU by 2020 to justify setting a target”—there is too little time to create a new incentive for 2020.140
56.Advanced biofuels “require huge capital investment if they are to reach commercialisation, and this investment will be stifled if the UK Government does not offer future policy certainty to industry”,141 according to the NFU, whose Dr Scurlock added “we are never going to get to advanced biofuels if we do not have a thriving biofuels industry here in the UK in the first place”.142 The LCVP noted “the [Transport] Task Force agree that the UK should invest in sustainable advanced fuels” and mentioned setting a target—as well as “fiscal and capital support”—in aid of this goal.143
57.Andrew Jones MP stated “we see quite a significant role for advanced biofuels”,144 with Rob Wakely confirming the Government is “looking at including a proposal” on the 0.5% target in the promised RTFO consultation.145 Advanced biofuels could play an important role in long-term decarbonisation, especially if they avoid indirect land use change. We are agnostic about setting a short-term target for advanced biofuels, but believe this is an important area for research and development.
Transport electrification
58.An ultra low emission vehicle (ULEV) emits extremely low levels of CO2 compared to petrol and diesel equivalents. There are four main types of ULEV:
- Battery electric vehicles (BEVs) run only on electricity and are recharged by plugging into the grid.
- Plug-in hybrid electric vehicles (PHEVs) are also recharged by plugging into the grid, but can switch between electricity and fossil fuels.
- Hybrid electric vehicles (HEVs) can also switch between electricity and fossil fuels, but feature smaller batteries that charge while driving.
- Fuel-cell electric vehicles (FCEVs) use non-fossil fuels (such as hydrogen) to power an electric motor.
These all feature electric motors, and so the terms ULEV and electric vehicle (EV) are often used interchangeably.146
59.“The electrification of transport is the cornerstone of current policy to reduce carbon emissions from transport energy”,147 according to the LCVP, but EVs “will remain niche in the period to 2020”.148 Fewer than 30,000 of the 2.6 million new cars registered in the UK last year were ULEVs, as are only 0.19% of all cars on the road.149 Rob Wakely of the DfT expected road and rail electrification to contribute one percentage point towards the 10% target;150 the UK Energy Research Centre (UKERC) anticipated that only 0.1–0.3% of total transport energy would be electric by 2020.151
Figure 4
60.DECC told us that “to meet the manifesto commitment for almost all cars and vans to be zero emission by 2050, all new car and van sales will need to be zero emission by 2040 due to fleet turnover times”:152 this will require enormous progress. To this end:
The Government has committed over £600m across the Spending Review period to tackle the major barriers to ULEV uptake: the high up-front cost of the vehicles; real and perceived concerns about range; the adequacy of charging infrastructure and a lack of knowledge about ULEVs.153
E.ON expected EVs’ “major breakthrough with customers…to take place in the 2020s”.154
Cost
61.The Government supports ULEV purchases through the Plug-in Car Grant, which provides consumers with up to £4,500 towards the upfront cost of a BEV or PHEV.155 The Energy Research Accelerator suggested “the promotion of financial incentives is likely to be the best way of ensuring adoption of EVs until the cost of EV technology lowers”;156 SSE agreed.157
62.However, current incentives do not extend to ongoing costs. Vehicle Excise Duty (VED) was reformed in the 2015 Budget, moving from a many-tiered system where payments scaled with CO2 emissions to a simplified, three-level approach. From 1 April 2017, new vehicles will pay nothing if (and only if) they emit absolutely no CO2. Most other vehicles will pay a flat ‘Standard Rate’ of £140 annually (with a premium of £310, for five years, on cars worth over £40,000). This reform aimed to “make [VED] fairer for motorists and reflect improvements in new car CO2 emissions”.158 Good Energy told us:
Whilst the need to maintain the overall amount raised from vehicle road tax was legitimate, the changes are an unnecessary attack on the most efficient vehicles. Gradually decreasing the emissions bands of the current tiered system would have been a fairer way of maintaining this revenue and one that aligns with the government’s own desire for ‘almost every car and van to be a zero emission vehicle by 2050’.159
The Energy Research Accelerator argued that the previous VED system “had a genuine impact through increased sales of low emissions vehicles and improved public awareness of CO2 production from vehicles”.160 SSE noted “there is no differentiation between a conventional car and a Plug-in Electric Vehicle” under the new system.161 Philip Sellwood claimed the change “sent a signal not only to the manufacturing community but also to consumers that this is not something to be trusted”,162 and weakened ULEV resale value.163 Andrew Jones MP replied that “the sales figures don’t suggest there is a problem here”.164
63.We regret the Government’s changes to Vehicle Excise Duty, which reduced incentives for ultra low emission vehicle (ULEV) uptake and may be interpreted as wavering commitment to road electrification. The Government should reconsider abolishing the tiered system. In the future, fiscal incentives for ULEVs must be maintained with greater consistency.
64.Fuel duties are a significant component of public revenue, totalling £27.6 billion (approximately 5% of all receipts).165 Philip Sellwood estimated that road electrification would cost HM Treasury £4 billion in reduced taxes.166 Ensus asked, “How does the Treasury plan to fill the gap in fuel duty revenue”?167 Indeed, this loss of revenue may diminish HM Treasury’s enthusiasm for ULEVs. Moreover, a looming, unfunded gap in the public finances may raise ULEV producers’ and buyers’ fears of future tax hikes.
65.Road electrification implies a significant reduction in tax revenue in the long term. It is important that this does not deter the Government from rolling out ultra low emission vehicles (ULEVs), for which current financial support must continue. HM Treasury should publish options to address the future fiscal implications of near-universal ULEV uptake: this would improve confidence in Government finances and the future of road electrification.
Charging infrastructure
66.Drivers with internal combustion engines enjoy a comprehensive network of commercial filling stations, but the charging network for plug-in and hybrid electric vehicles remains limited. The UK has public charging points at over 4,000 locations; rapid chargers are available at approximately 700 of these.168 We were advised, during our informal roundtable meeting in May, that most BEV and PHEV users charge at home and work. However, SSE observed:
The ownership of Electric Vehicles (EVs) may be limited by consumer anxiety over the range of EVs and the lack of a national network of charge points that give EV users the confidence to switch from traditional vehicles. The Government should continue to work with the private sector to increase the roll-out of the rapid charging network and encourage the deployment of EV charging infrastructure.169
11% of EV drivers live in rural areas (against 18% of the population).170 The Campaign to Protect Rural England noted this ‘range anxiety’ “is likely to be higher in rural areas due to the lower density of the charging network, and government subsidies currently support EV ownership and charging points in cities”.171 It advocates “more emphasis on closing the gaps in charging networks in rural areas”.172 The 2050 Climate Group agrees there is “an overly urban-centric strategy for charging infrastructure”.173
67.Development of charging infrastructure has generally been promising, and is not the main barrier to ultra low emission vehicle (ULEV) uptake. However, this has not been the case in rural areas.
Grid impacts
68.Major vehicle electrification will raise pressure on the electricity networks. My Electric Avenue, an Ofgem-funded research project investigating the impact of electric vehicles on local networks, concluded that “local electricity networks in some areas will struggle to cope with the charging of electric cars (with 3.5 kW charging) when 40–70% of properties connected to a substation feeder have EVs”.174 Stewart Reid, Head of Asset Management and Innovation at SSE, explained this ‘clustering’:
The clustering effect, by which I mean if you drive through a town now you will see areas where there are lots of solar panels and you will see areas where there are no solar panels. They cluster, and it is sometimes behavioural, sometimes economic. There are different reasons as to why they cluster, and that clustering creates little points of stress on the electrical network. In the project we want to understand what things trigger these clusters and how we can predict where these clusters are going to appear so that we can respond in advance. You could get a scenario where a relatively low uptake of electric vehicles results in a lot of intense clusters, each of which requires investment.175
He costed these clusters at “about £1,000 to do the substation work, and a few hundred pounds to do the work on the individual homes”.176
Public engagement
69.Describing a pathway for major uptake of ULEVs, Jonathan Murray explained:
If you look at how they deploy new technology in the automotive industry, the way they do it is into high-spec halo vehicles at the top end of the market. So the starting point for this has been Tesla. When James Bond drives an electric Aston Martin, I think that will have quite a big impact. Seeing Formula E in Battersea Park and on the streets of London, it will start to have that impact. That is how technology traditionally has been rolled out for the automotive industry, at the top end of the market, and then it cascades down, rather than bottom up.177
70.The 2050 Climate Group suggested “reform of government and public sector transport procurement policies to require that sustainability is an overarching material consideration” and further recommended “a requirement for those in the public sector to publicise utilisation of renewable energy sources in their total heat, power and transport consumption”.178 Philip Sellwood described “leadership of public procurement” of EVs as “lacking”.179
71.The Government should take the lead on awareness of ultra low emission vehicles (ULEVs) through greater public procurement.
Freight transport
72.Heavy Goods Vehicles (HGVs) are 1.5% of road vehicles180 but responsible for approximately 20% of the UK’s CO2 emissions181 and difficult to electrify.182 BOC, a specialist gas provider, and the Freight Trade Association (FTA) called for “a greater proportion of OLEV funding” in freight,183 claiming this proportion is currently only 1.7%.184 Access to biomethane as a transport fuel may be limited due to subsidy mismatch: the FTA argued “Government policies such as the Renewable Heat Incentive provide a much greater incentive for biomethane producers to inject into the grid for electricity and heating, rather than further upgrading the biomethane for use as a transport fuel”.185 Gasrec, a fuel supplier, claimed “one area where the Government’s policies are inadequate is in respect of subsidies to promote the use of biomethane as a transport fuel, where the CO2 reduction benefits are greatest, instead of for heat and power”, arguing that “there is no other alternative fuel than methane/biomethane to power HGVs”.186 The FTA calls for “Government to re-prioritise biomethane towards the transport sector”.187 Dr Skorupska told us “there is a strong supply potential of biomethane and bio-SNG … but we are lacking the vehicles at this moment in time”.188 Andrew Jones MP conceded “we will need liquid fuels for HGVs, potentially for decades to come”.189
73.Heavy Goods Vehicles (HGVs) must be decarbonised but electrification, even in the long term, is unlikely. The Government must ensure HGV operators are sufficiently supplied and incentivised to move to biomethane over the medium-to-long term.
Heat electrification
74.Gas networks provide for 80% of the UK’s energy needs at peak.190 UKERC estimated “complete electrification of existing UK household and space heating … would add 40GW to peak winter demand”, and that “large scale electrification of cars alone would add about 7 TWh and 25 TWh to annual electricity demand by 2030 and 2050 respectively”.191 The Energy Networks Association noted “the electrification of some heat and transport demand will present challenges to the UK electricity network, which will need to adapt to accommodate greater seasonal peaks from heat pumps and the simultaneous charging of electric vehicles”.192 The Energy Research Accelerator cautioned that “given the present rate of the decarbonisation of electricity … it is unlikely that there will be sufficient low carbon generation capacity to decarbonise heat”.193 As an alternative to electrification and a new gas grid, we called on the Government to provide “a regulatory investment framework for district heating” in our recent Low carbon network infrastructure report.194 UKERC concluded that “complete electrification of heating would not be a sensible goal, and therefore that policies should also incentivise increasing energy efficiency and possibly biomass and heat networks”.195
75.Adding together unsatisfactory heat-pump performance, the seasonality of heat demand, and the limits of the electricity networks—which the Government also intends to use for transport energy in the long term—it is clear that the Government cannot rely on complete heat electrification. Bioenergy, a greener gas grid and district heating all have roles to play in this sector.
108 International Energy Agency, Bioenergy, accessed 1 September 2016; POST, POSTnote 410, Bioenergy, May 2012
109 BEIS, DUKES 2015, Renewable sources of energy, Renewable sources used to generate electricity and heat and for transport fuels (DUKES 6.6), July 2016
110 Leilei Ruan et al, “Nitrogen fertilization challenges the climate benefit of cellulosic biofuels”, Environmental Research Letters, vol 11(6), June 2016; Professor Keith Smith et al, Response to Transport Biofuels Consultation, June 2011, p2
111 HM Government, UK Bioenergy Strategy, April 2012
112 CCC, Meeting Carbon Budgets—2016 Progress Report to Parliament, June 2016, p160
114 IRENA, The renewable route to sustainable transport, August 2016, p6
118 Q110
119 Q113
120 Q182 [Sarah Redwood], Q183 [Andrew Jones MP]
121 Ofgem, Factsheet: Biomass sustainability and the Domestic RHI, March 2016
122 DECC, New biomass sustainability requirements for the Renewable Heat Incentive, February 2015, p1
123 DfT, RTFO Guidance Part Two: Carbon and Sustainability Guidance, RTO Year 9, April 2016, p8
124 DECC, Timber Standard for Heat and Electricity: Woodfuel used under the Renewable Heat Incentive and Renewables Obligation, Feburary 2014
125 DfT, RTFO Guidance Part Two: Carbon and Sustainability Guidance, RTO Year 9, April 2016, p8
129 Directive (EU) 2015/1513, Article 2(b)(iv)
131 Directive (EU) 2015/1513, Article 4(1)
132 Q185 [Andrew Jones MP]
133 Q183
135 Vivergo Fuels Ltd (HAT0025), para 7(c); British Sugar (HAT0043), para 7(c)
137 Directive (EU) 2015/1513, supra note 7
138 Directive (EU) 2015/1513, art 2(e)
139 Vivergo Fuels Ltd (HAT0025), para 7(d); British Sugar (HAT0043), para 7(d)
142 Q110
144 Q188
145 Q189
146 House of Commons Library, Electric vehicles and infrastructure, January 2016; Office for Low Emission Vehicles, Driving the Future Today: A strategy for ultra low emission vehicles in the UK, September 2013; Q57 [Jonathan Murray]
149 DfT, All vehicles (VEH01): Statistical data set, July 2016
150 Q157
155 HM Government, Plug-in car and van grants, accessed 1 September 2016
156 Energy Research Accelerator (HAT0067), para 21
158 HM Treasury, Summer Budget 2015, sect 4.2
160 Energy Research Accelerator (HAT0067), para 9
162 Q34
163 Q67
164 Q194
165 HM Revenue and Customs, HMRC Tax and NIC Receipts: Monthly and annual historical record, July 2016, p3, 7
166 Q62
168 Zap-Map, Charging Point Statistics 2016, accessed 1 September 2016
174 My Electric Avenue, Project Summary Report, p15
175 Q128
176 Q133
177 Q58
179 Q15
180 UK Onshore Oil and Gas (HAT0021), para 17
181 BOC (HAT0037), “Key Observations”; NGVN (HAT0039), Energy Networks Association (HAT0064); Q127 [David Manning]
182 Gasrec (HAT0024); NGVN (HAT0039); Progressive Energy (HAT0061), para 11(e); Energy Networks Association (HAT0064); Q93 [Dr Skorupska]
188 Q92
189 Q152
193 Energy Research Accelerator (HAT0067), para 17
194 Energy and Climate Change Committee, First Report of Session 2016–17, Low carbon network infrastructure,
HC 267, para 51
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7 September 2016