Emma Pinchbeck, chief executive of Energy UK, discusses the impact of electrified transport on the energy system and shares her thoughts on what needs to happen next.
Energy UK’s membership spans the energy industry, giving us an incredibly broad perspective of the changes happening across the energy sector. Right now, one of the most topical subjects in energy is the uptake of electric vehicles (EVs).
Until relatively recently the power sector was the highest emitting sector in the UK, but since 1990, emissions have been cut by 62%. Low carbon sources now make up more than half of total GB generation with coal set to be taken off the system altogether.
Even today, our lower carbon electricity system means that EVs are already cleaner than internal combustion engine vehicles, and they will get even more green as power continues to decarbonise.
However, renewables are a fundamentally different kind of power to traditional thermal power plants - they are variable and operate at zero marginal cost, for example. At the same time, we are also adding more technologies and assets to the distribution system.
This decarbonised, distributed, energy system in the UK will require different management to make sure it is efficient and cheap for consumers and to get the benefits of new technologies. Investing in flexibility across the system is estimated to be worth £8bn a year to the economy by 2030 and between £17-40bn a year by 2050.
Energy UK discussed in depth how to unlock those benefits in our report Delivering on the potential for flexibility. There are larger questions about how we design the right policy and markets for this new world - but these are perhaps for discussion in a future blog!
Increasing the demand for electricity
Can the energy system cope with the increased electricity demand from EVs? It’s a question we get asked a lot. The short answer is: yes it can, but only if we are smart (in every sense of the word) about it.
EVs do increase household electricity consumption, but they are also a flexible load on the system. For example, in many households, EV charging will be done overnight when demand is low, or automated to charge during other low demand periods. This enables drivers to benefit from cheaper electricity and there are broader consumer benefits to avoiding unnecessary, costly network reinforcement.
That’s not to downplay the challenge the electrification of transport represents. Some parts of the network have more headroom than others, and bottlenecks have emerged in how charging connections and EVs are rolled out nationally.
One way of ensuring that the system reflects the regional nature of network needs is to enable localised, dynamic price signals, so that retailers and energy service providers can then incentivise drivers to align their charging with network needs.
While good progress is being made, flexibility at a local level, where the challenges are likely to be the most acute, requires a big change in how distribution network operators work.
Improved monitoring, new digital capabilities, price signals and market structures will all be needed to encourage the right behaviour. But, as we’ve said, the benefits of a smarter, more flexible energy system are worth the work. Ofgem, the industry regulator, is currently working with network companies on the next price control period, which sets out the framework for network investment for the coming few years.
Phasing out the combustion engine: the big task of the 2020s
Meanwhile, whilst demand for EVs is at record-breaking levels, stronger regulation and incentives are needed for us to break free from our reliance on fossil fuels.
Energy UK, and many others, suggest requiring car manufacturers to sell an increasing proportion of EVs over time. This is called a Zero Emission Vehicle (ZEV) mandate. It ensures that the supply of EVs increases – a key barrier to uptake right now – and that global manufacturers are appropriately incentivised to market and sell EVs in the UK.
New vehicle emissions standards also need to be tightened. Cutting emissions from new petrol and diesel vehicles sold between now and 2030 is really important, as they’ll be on the roads for over a decade once driven off the forecourt.
It’s important to remember that the outcome we want policy to drive (pun intended) is decarbonisation, not a switch to EVs per se, although they are brilliant technology. As the International Energy Agency points out in their global net zero report, we need to switch a third of journeys made by car to public transport by 2050.
That addresses the supply side, but upfront cost is one of the most prominent concerns for would-be EV drivers. Subsidies will be important as long as EVs are more expensive to purchase than petrol or diesel cars, which could be as soon as 2027, according to a recent study.
Purchase grants come at a cost to the taxpayer, however. So we suggest introducing what’s known as a bonus-malus scheme. A first-year registration tax is levied on new vehicles based on their emissions, the revenue raised then covers the cost of providing purchase grants for EVs.
2020 was an important year for EVs with the government announcing that new petrol and diesel cars will be phased out from 2030 and that from 2035 all new cars and vans would be zero-emission.
But with the UK hosting COP26 and firmly under the microscope for its delivery of decarbonisation, 2021 is therefore a key opportunity for the government to back up its lofty ambitious with concrete action. Putting its shoulder to the wheel behind the EV rollout will be one way of showing it means business.
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Guest blogger: Emma Pinchbeck, chief executive of Energy UK.
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