James Heath: "pace, not perfection" key to reducing infrastructure emissions.

Our chief executive's speech to UK Sustainable Infrastructure Summit outlines the challenges in creating low carbon energy systems, which NIA2 will address.

Published: 6 Jul 2023

By: Rob Mallows

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An image showing two men helping to build a wind turbine in County Durham

Commission chief executive James Heath spoke this afternoon (6 July) to the 18th Annual UK Sustainable Infrastructure Summit in London. In his remarks he explored the scale of the challenge facing the UK in fully decarbonising its energy systems by 2050 and the principles the Commission is using to guide the recommendations it will make to government in the second National Infrastructure Assessment this autumn on how this challenge can be met.

“Thank you, and good afternoon everyone.

Our job at the National Infrastructure Commission is to provide government with independent, expert advice on economic infrastructure. We take a long term view of the UK’s infrastructure needs and develop the policy and funding mechanisms to get us from here to there.

Producing a National Infrastructure Assessment once every five years is the Commission’s core function. Our first Assessment was published back in 2018 and has shaped many aspects of infrastructure policy, from the establishment of the UK Infrastructure Bank to the development of a national plan for full fibre broadband.

We’ve likened the next NIA to a band recording its second album: you want to retain the support of those who liked what you did first time, but you still have more to say; and of course, the world changes over time.

The second Assessment is framed around addressing three major strategic challenges: reaching net zero; promoting economic growth across the whole country; and improving our environment and climate resilience.

Today, I will focus on the first goal – achieving net zero by 2050 – and set out the approach we are taking in the second Assessment and then share our thinking on the critical building block of a low carbon energy system.

Economic infrastructure accounts for over two thirds of the UK’s carbon emissions. In virtually all areas, we have set stretching goals for reducing these emissions. We know the scale of challenge: it is huge.

To meet the statutory Sixth Carbon Budget in 2035, unabated fossil fuel use to generate electricity has to be close to zero; has to fall by 70 per cent in surface transport; has to fall by 50-60 per cent in heat; and has to fall by 65-75 per cent across industry. In infrastructure terms, 12 years is not a long time, so many of the projects needed to hit the Sixth Carbon Budget will have to be in train in the next few years.

In most areas, we know what needs to be done to meet the carbon reduction challenges I’ve just described. In all scenarios, electricity will be the primary vector to decarbonise the economy. This means scaling up every part of the electricity system to meet rising demand from industry, heat and transport.

But only in some areas do we currently have plans and policy measures of sufficient scale to move the dial.

The net zero transition will be capital intensive: it involves substituting new capital assets like wind turbines and expanded electricity grids for the opex costs of fossil fuels. The Climate Change Committee estimates that up to £50 billion of investment will be needed each year between 2030 and 2050.

While higher public investment undoubtedly has an important role to play, it only accounts for around 50 per cent of total infrastructure investment, so a sustained increase in private sector investment is also essential. And this will require policy and regulatory approaches that make UK infrastructure opportunities investable – particularly at a time of intense global competition for capital.

We will be clear in the second Assessment that infrastructure policy needs to be guided by a set of core principles.

The government should do fewer things – but those things that it does do, it should do faster and bigger. In some areas, options will need to be closed down – even if that means taking some strategic bets, all of which may not fully pay off in the long run. Government won’t meet its ambitions with years of repeated consultations. Pace, not perfection, must become the mantra.

The second principle that you can expect to see running through the Assessment is the value of devolution. The Commission believes that decisions taken locally better meet people’s needs. While devolution does not necessarily make sense for every policy or infrastructure area, we do think that where practicable, government should deliver broader and deeper devolution in a range of areas.

Lastly, we will urge policy stability and staying power. In recent years we have seen far too much chopping and changing across infrastructure policy. This creates uncertainty for investors, operators and supply chains – and it increases costs.

One only has to contrast, on the one hand, the impact of the stop/start approach to energy efficiency which has led to low rates of installations over the past decade – with the stability created through the Contracts for Difference mechanism that has supported the rapid deployment of renewables, on the other. The second Assessment will set out a series of long term decisions for government to make, and crucially then stick to.

Now let me share with you how these policy principles have shaped our approach to a subject that will be at the heart of the second Assessment: how to achieve a low carbon and resilient, secure energy system.

We are taking a system-wide view of energy with the main focus of our analysis being on three specific areas: one, the provision of adequate flexibility in the electricity system; two, creating new hydrogen and CCS networks; and three, accelerating heat decarbonisation. This choice of subjects reflects our view of policy maturity relative to the scale of the challenge in the different parts of the energy system.

As I said at the start, in most areas we know what needs to be done, even if the scale and pace of change is huge. The investment decisions here should be largely ‘low regrets’ or at least ‘acceptable regrets’. I’d put increased bulk power generation in this first category. Significant progress has been made in decarbonising electricity generation. Wind and solar have won. We just need to get on and build them, at a faster speed.

Less progress has been made so far with the transformation of the electricity transmission and distribution grids to connect this supply with demand. But while the exact shape of the future system is unclear, the direction of travel is not.

Major network expansion needs to happen, under all scenarios, to cope with higher electricity demand and a bigger footprint. It will require strategic system-wide planning at a national and regional level as well as investment ahead of need, sufficient to meet the demands implied by carbon budgets.

With both generation and transmission, the single biggest constraint on the rapid deployment of the necessary infrastructure is planning. This is a theme that has dominated today’s discussions.

Over the last decade, the time taken to receive a Development Consent Order has increased by 65 per cent to over four years on average, and the rate of judicial review has spiked in recent years to 60 per cent from a long term average of ten per cent. The NSIP consenting regime for major infrastructure projects needs radical reform.

The Commission was asked to look at this by the Chancellor and we reported back in April.

We concluded that the biggest single problem was the absence of up-to-date National Policy Statements to guide decision making. We have urged government to make the review of these statements at least every five years a statutory responsibility, and for National Policy Statements to relate explicitly to spatial plans for energy wherever possible. We also recommended provision for ‘modular updates’ to the statements, as and when new legislation is passed, or new technologies emerge, to make the system more flexible and fleet of foot.

We further called for a fresh approach to measuring environmental impacts and their effective mitigations. We have proposed a national database of environmental data, and the mitigations that have been proved to work, from which developers could draw – thus avoiding duplication of effort and the sharing of good practice.

One final recommendation I will touch on is the idea of local communities receiving more tangible, direct benefits from hosting major infrastructure schemes that support national objectives. These benefits may take the form of lower utility bills, or funding for community projects. Mandatory adoption of such a framework by developers would provide greater consistency at a national level on the benefits received by local communities for helping the country meet its future infrastructure needs.

It has been encouraging to see the positive reaction to our reform proposals from both industry and environmental groups. We hope government will now act.

There is a second category of energy system changes where uncertainty is perhaps greater and there are clear co-ordination challenges to overcome. I would put long term power flexibility – and developing the infrastructure needed to transport and store hydrogen and CO2 – in this category.

As I said earlier, while bulk power from renewables is largely sorted as an investment proposition, we will need new sources of flexible power to fit around it, especially for long duration calm, cloudy periods. That looks to us like gas with carbon capture and storage and hydrogen fired generation. We must be on a path to significant deployment by 2030 to deliver a decarbonised electricity system by 2035. Because these technologies can’t compete with unabated gas, government will need to support them with appropriate business models.

Government intervention will also be all but essential, in our view, to secure the new hydrogen and CCS networks needed to meet our stretching industrial decarbonisation targets as well as supporting low carbon flexible power – as just mentioned – and also engineered greenhouse gas removals.

A lot of industries will use electricity; but those that can’t will need one or both of hydrogen and CCS. One way to think about this is ensuring the UK protects its industrial activity in a world where buyers will be demanding low carbon products that can only be produced with access to new infrastructure.

While government is rightly focused on supporting hydrogen and CCS hubs within industrial clusters, we believe there is also value in connecting up core sites of hydrogen and CCS users, producers and stores to form transmission networks.

To stimulate private sector investment, government will need to provide potential users, producers, storers and transporters of carbon and hydrogen with clarity on the extent of the core networks that are envisaged and the business models to support them.

Finally, there are parts of the energy system where policy development is currently too slow and just doesn’t match the scale of the challenges. Heating decarbonisation falls into this third category – it’s by far the biggest net zero problem we face. Currently around 85 per cent of homes in England are heated with gas boilers. To get off gas heating at the pace necessary, around nine million additional buildings will need to switch from fossil fuel to low carbon heat by 2035. Our view is that the solutions already exist.

Heat pumps, for example, are highly efficient, available now and deploying rapidly in comparable countries. But we shouldn’t underestimate the challenge of asking millions of households to pay more to get something they already have. They must be incentivised to switch from their gas boilers to low carbon heating systems – and this will require government to play a leadership role.

In all the areas I’ve mentioned – long term power flexibility, hydrogen and CCS networks and heat decarbonisation – the second NIA in October will set out bold recommendations to fill in the policy gaps and drive the scale and pace of infrastructure change that is necessary.

Going big and moving at pace is not only necessary to meet the UK’s carbon targets but it should also have economic benefits.  It is the best way for the UK to capture market share in global low carbon sectors, where we have or can build competitive strengths. There is also an opportunity with the heat transition to create new high-quality jobs across the whole country. And decarbonising our energy system will help protect consumers and businesses from volatile fossil fuel prices, and deliver lower bills over time.

We will publish the second NIA in October this year. I hope the indications I have been able to give today serve as a useful warm up.

The Assessment will be the end of one important phase of our work, but just the beginning of another. We will rely on colleagues from industry and beyond to ensure that our ideas are translated into action – and crucially, that government hears where there is wide support for our recommendations.

So, I look forward to working with you all on that shared endeavour.”

-ENDS-

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