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.
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. These forms of bioenergy together account for 70.72% of the UK’s renewable energy across electricity, heat and transport.
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. 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.
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”.
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”: 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”. 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”.
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)”. The NFU pointed out “biofuels tend to replace the most marginal and high-carbon liquid fossil fuels”. Dr Skorupska contended “developing biomass heat actually incentivises and benefits our forests, bringing in the undermanaged forests”. 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”.
48.The Government has introduced sustainability criteria for biomass under the RHI and biofuels under the RTFO. Biomass in the RHI must be “an approved sustainable fuel from a supplier listed on the Biomass Suppliers List” and represent 60% lifecycle GHG savings against the EU fossil fuel average. Biofuels must achieve 35% GHG savings (rising to 50% in 2017) to qualify under the RTFO. There are rules governing timber sustainability, and other biofuels cannot be grown on land with high biodiversity value or carbon stock. 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”. 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”. 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”.
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.
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. 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”. Member states must comply with the Directive by September 2017.
53.The Directive has not yet been transposed into UK law, but the Government has proposed a more stringent crop cap, at 1.5%. 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”. 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”. 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”. Valero Energy, another bioethanol producer, recommended the UK accept the EU’s 7% level so as to “not be disadvantaged against other member states”.
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.
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.
The ILUC Directive sets an optional 0.5% target for advanced biofuels in transport. British Sugar and Vivergo wanted this target implemented in the UK. 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.
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”, 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”. 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.
57.Andrew Jones MP stated “we see quite a significant role for advanced biofuels”, with Rob Wakely confirming the Government is “looking at including a proposal” on the 0.5% target in the promised RTFO consultation. 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.
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:
These all feature electric motors, and so the terms ULEV and electric vehicle (EV) are often used interchangeably.
59.“The electrification of transport is the cornerstone of current policy to reduce carbon emissions from transport energy”, according to the LCVP, but EVs “will remain niche in the period to 2020”. 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. Rob Wakely of the DfT expected road and rail electrification to contribute one percentage point towards the 10% target; the UK Energy Research Centre (UKERC) anticipated that only 0.1–0.3% of total transport energy would be electric by 2020.
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”: 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.
E.ON expected EVs’ “major breakthrough with customers…to take place in the 2020s”.
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. 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”; SSE agreed.
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”. 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’.
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”. SSE noted “there is no differentiation between a conventional car and a Plug-in Electric Vehicle” under the new system. 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”, and weakened ULEV resale value. Andrew Jones MP replied that “the sales figures don’t suggest there is a problem here”.
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). Philip Sellwood estimated that road electrification would cost HM Treasury £4 billion in reduced taxes. Ensus asked, “How does the Treasury plan to fill the gap in fuel duty revenue”? 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.
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. 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.
11% of EV drivers live in rural areas (against 18% of the population). 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”. It advocates “more emphasis on closing the gaps in charging networks in rural areas”. The 2050 Climate Group agrees there is “an overly urban-centric strategy for charging infrastructure”.
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”. 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.
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”.
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.
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”. Philip Sellwood described “leadership of public procurement” of EVs as “lacking”.
72.Heavy Goods Vehicles (HGVs) are 1.5% of road vehicles but responsible for approximately 20% of the UK’s CO2 emissions and difficult to electrify. BOC, a specialist gas provider, and the Freight Trade Association (FTA) called for “a greater proportion of OLEV funding” in freight, claiming this proportion is currently only 1.7%. 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”. 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”. The FTA calls for “Government to re-prioritise biomethane towards the transport sector”. 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”. Andrew Jones MP conceded “we will need liquid fuels for HGVs, potentially for decades to come”.
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.
74.Gas networks provide for 80% of the UK’s energy needs at peak. 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”. 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”. 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”. 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. 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”.
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.
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109 BEIS, DUKES 2015, , Renewable sources used to generate electricity and heat and for transport fuels (DUKES 6.6), July 2016
110 Leilei Ruan et al, , Environmental Research Letters, vol 11(6), June 2016; Professor Keith Smith et al, , June 2011, p2
111 HM Government, , April 2012
112 CCC, , June 2016, p160
113 Greenpeace UK ()
114 IRENA, , August 2016, p6
115 UKERC ()
116 UKERC ()
117 NFU ()
120 Q182 [Sarah Redwood], Q183 [Andrew Jones MP]
121 Ofgem, , March 2016
122 DECC, , February 2015, p1
123 DfT, , April 2016, p8
124 DECC, , Feburary 2014
125 DfT, , April 2016, p8
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127 Low Carbon Vehicle Partnership ()
128 UKERC ()
129 , Article 2(b)(iv)
130 Low Carbon Vehicle Partnership ()
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134 REA (), para 8.3
135 Vivergo Fuels Ltd ( ), para 7(c); British Sugar ( ), para 7(c)
136 Valero Energy Ltd ()
137 , supra note 7
138 , art 2(e)
139 Vivergo Fuels Ltd ( ), para 7(d); British Sugar ( ), para 7(d)
140 UKPIA (), sect 1(e)
141 NFA ()
143 LCVP (), sect 2.4
146 House of Commons Library, , January 2016; Office for Low Emission Vehicles, , September 2013; Q57 [Jonathan Murray]
147 LCVP ()
148 LCVP ()
149 DfT, , July 2016
151 UKERC ()
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158 HM Treasury, , sect 4.2
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161 SSE (), para 10
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167 Ensus UK Limited ()
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173 2050 Climate Group (), para 6
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178 2050 Climate Group (), para 13
180 UK Onshore Oil and Gas ( ), para 17
181 BOC (), “Key Observations”; NGVN (), Energy Networks Association (; Q127 [David Manning]
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7 September 2016