1 August 22

Net Zero can only be achieved through holistic investment across the energy system

If the UK is to realise its commitment of achieving net zero by 2050 and limit damaging increases in global temperatures, we need to drastically increase investment across the whole of the UK energy system as part of decarbonisation and the energy transition.

According to the UK’s Department for Business, Energy, and Industrial Strategy, this country emitted 405.5 million tonnes of CO2 in 2020, some of the latest figures available. Though considerably lower than where we were in 1990, our need for energy is increasing, with expected demand for electricity to triple by 2050.

Balanced investment across the whole energy system is needed. The International Energy Agency’s (IEA) recent roadmap for the global energy sector concluded that reaching net zero by 2050 hinged on an unprecedented push towards clean technologies by 2030, which requires an “immediate and massive deployment of all available clean and efficient energy technologies.” But investment and development cannot be siloed, just focused on specific parts of the system.

Taking a Holistic Approach

We believe that the transition to net zero requires a holistic approach with a move away from centralised generation to decentralised, low carbon production located as close as possible to centres of demand. It must have adequate and efficient distribution and storage. And efficiency of consumption and onsite use must be considered, whether in an industrial, commercial, or residential setting, to reduce overall demand.

Supporting net zero requires wholescale decarbonisation of the energy system, starting with energy production. Hydroelectric generation, of which TEEC’s portfolio includes nine assets across the Scottish Highlands, produces a 100% renewable, low carbon energy source far more efficient than its fossil fuel forebears. Greater proximity to both the source of energy and point of grid connection reduces waste, while the inputs required to access water power are nil, as no other energy is needed to access it. We estimate that 3,578 tCO2 has been abated to 31 March 2022 since the acquisition of these assets.

It will also require energy storage and distribution to balance increasingly volatile supply and demand profiles. For instance, last year, enough energy to power almost one million homes for a year, generated from wind, was simply lost though inefficiencies in the system, at a cost of £507 million, according to LCP, a consultancy. The UK’s wind capacity has increased from 5.4GW in 2010 to 25.7GW in 2021, but due to a lack of adequate infrastructure, such as grid-level battery storage, curtailment is costing vast sums, and wasted potential.  

Cutting lost energy will of course be crucial in meeting our energy goals, both in decarbonising and reducing the cost passed onto consumers. With wind energy curtailments expected to cost the consumer a staggering £1 billion per year by 2025, rapid investment and development of infrastructure is needed now. An increase of just 20GH of battery storage could reduce the amount of wasted wind power in the UK by 50%.

But we must do what we can to reduce demand for energy at the point of use. Business as usual simply doesn’t work in our energy futures. We must do more from less.

This means improving the energy efficiency of our building stock through upgrades like retrofits or installing energy-efficient light bulbs such as LEDs and other appliances. Encouraging on-site generation will mean homes and businesses can supplement their energy needs by producing their own through things like rooftop solar panels.

Combined heat and power facilities are a good example to illustrate this. Last year, TEEC invested in Spark Steam, a CHP provider in Teesside which provides heat, power and carbon dioxide to APS Group, which supplies tomatoes to our major supermarkets, and is the country’s biggest domestic grower of tomatoes. The heat supplied to them by Spark Steam allows them to regulate the temperature and humidity to create the perfect growing environment in glass houses. In turn, by also using the CO2, which would have otherwise been a waste product contributing to global warming, APS can increase crop yields by as much as 20%.

Looking forward

Governments have an important role to play by providing funding for projects and committing to long-term policies that encourage private sector investment in clean energy infrastructure, reducing the risk for investors and developers. The public sector must set an agenda and engender an ecosystem in which the innovations and capital of the private sector can thrive to drive the mission to net zero.

It is no surprise that private sector investment into clean energy technologies is rising and fueling progress. More money flowed into clean infrastructure in 2021 than traditional infrastructure – of the $530 billion spent on all new generation capacity, 70% went to renewables. Furthermore, with returns on a renewable energy fund’s investment often contractually linked to inflation, they offer an attractive inflation hedge to institutional and retail investors alike.

According to the IEA, rapid technological improvements and cost reductions mean a dollar spent on wind and solar photovoltaic (PV) deployment today results in four times more electricity than a dollar spent on the same technologies ten years ago. With greater investments in renewables, grids, storage, and other critical infrastructure across the energy matrix, we will see exponential improvements. And so, funds that take a holistic approach are key to supporting the UK’s transition to net zero.

 

This article was originally published in Decarbonisation Technology

Jonathan Hick is an Investment Director at Triple Point Investment Management, and fund manager of the Triple Point Energy Efficiency Infrastructure Company (TEEC), an investment trust that works to support the transition to net zero by investing holistically across the energy sector, in order to deliver a diversified and attractive income for investors. Find out more about TEEC

Potential investors should refer to the information within the Prospectus which is available via the Documents section of the website and must only subscribe for or purchase shares in Triple Point Energy Efficiency Infrastructure Company PLC on the basis of information contained within it. As with all investments investors capital is at risk. Target returns may not be achieved and investors may not get back their full investment. Any references to past performance and expectations for the energy efficiency infrastructure market should not be taken as a reliable guide to future performance.