Driving UK decarbonisation in a new policy era

At Baringa’s sixth Green Buildings and Transport Forum in 20 November 2024, we discussed domestic decarbonisation in the context of the new UK government. It was a rich debate among energy suppliers, green finance providers, network operators, local government, and innovative solutions providers.  

There was general optimism about the policy context and opportunities for new business models, but key areas require ongoing collaboration between government and industry: 

• enabling distribution networks
• de-risking investment in low-carbon technologies
• removing friction from the customer experience through automation and smart technologiesensuring a just transition

• providing sticks as well as carrots to drive decarbonisation. 

We can’t neglect distribution

The new government has been clear about its clean power mission. It understands what’s at stake for energy security, long-term bill savings, and climate change mitigation. It has also acknowledged the scale of investment required. 

However, delegates agreed that the devil is in the detail. This is starting to come through with NESO guidance, Ofgem’s ED3 framework, and Nick Winser’s upcoming report for the National Infrastructure Commission. 

Emily Wilson-Gavin, head of corporate affairs at Scottish and Southern Electricity Networks (SSEN), emphasised an important overlap in these publications: “We really want to get distribution networks right for our customers and local communities, so we can facilitate decarbonisation pathways and deliver benefits for them.” 

Amid the headlines about offshore and onshore wind, solar, and batteries, there must be robust planning and execution on the distribution side, accounting for constraints related to planning, skills, and supply chains. 

Emily explained how SSEN is tackling these challenges through its strategic planning approach: “Distribution networks are embedded within and work hand-in-hand with local communities. We want to create optimised local systems that work for the areas and people they serve. Through our Strategic Development Plans, instead of planning in five years chunks, we’re planning up to 2050 and breaking delivery of that down into interim milestones. This helps us get ahead of the curve on the build side, whilst retaining the ability to amend plans and update plans as local requirements evolve.”  

Importantly, DNOs can’t do this alone. There will need to be public sector partnerships to enable them. 

We need creative ways to de-risk investment

Michelle Taute, head of strategic engagement at Tallarna, discussed how they’re using insurance to mitigate risk for funders. Tallarna, a climate tech company, has developed an ‘Energy-as-a-Service’ model they deploy in industrial and commercial real estate as well as social housing. With this model, customers pay a single monthly subscription fee in exchange for availability, economic benefits, and guaranteed performance from clean energy technologies. An integrated finance provider fully funds the equipment at a cost of capital that makes the subscription pricing attractive. Insurance then guarantees technology performance and benefits over the long term – and can be extended to cover market value risk.  

Michelle explained: “The insurance industry is predicated on managing risk and is therefore the right place to absorb the market, technical, and performance risks associated with low-carbon technologies. We have a proprietary policy that guarantees technologies’ outcomes in kilowatt-hours and what this means in pounds while we work with a partner to guarantee a minimum export price, addressing the merchant risk. This gives funders confidence to invest, and ensures everyone gets commercial benefits from day one.” 

We also discussed mitigating perceived risk from the consumer side. Attendees from financial services emphasised that government intervention is needed here, and that it’s not just about throwing money at people. After all, uptake on these technologies remains low despite grants and interest-free loans – partly due to concerns about long payback periods and uncertain value uplifts. We discussed various intervention ideas to address risks to consumers, including: 

• linking finance to the property instead of the individual
• stamp duty rebates
• localised market mechanisms tailored to the barriers in specific communities
• some sort of insurance to insulate homeowners from changes to the energy market and flex landscape.

Automation will help remove friction

An energy supplier delegate pointed out that it’s even hard to get people to switch tariffs unless there will be more than £200 annual savings. And that’s a much more straightforward proposition than switching to low-carbon technologies. 

How can we overcome this inertia in the mass market? Automation is part of the solution. All pathways to net zero rely on increasing levels of system flexibility, particularly from distributed sources. V2X and EVs represent huge opportunities, and automation of charging patterns and system responses is becoming increasingly viable. As we look to the future, maximising the efficiency of the system through using assets that already exist will be key to success. The potential reward is huge – recent work by Baringa found that V2X in carparks alone could unlock up to 10GW of flexibility by 2050. However, this will only work if we are able to make it simple for consumers. 

We must set the expectation that smart systems are the way to go – that they’ll maximise savings while optimising usage and participation in flex markets. That way, consumers can contribute to societal good and see personal benefits without putting in much effort. 

A just transition is a successful transition

There was a clear consensus: the UK won’t meet its decarbonisation targets without equitable access to low-carbon technologies. 

Cheryl Hiles, director of energy capital at West Midlands Combined Authority (WMCA), explained that their regional energy strategy is based on an equitable net zero, focusing heavily on smart local energy systems. Helpfully, this aligns with the emphasis on flexibility in Labour’s clean power mission.  

WMCA has an innovative project creating Net Zero Neighbourhoods. Homes are retrofitted with insulation and green heating on a street-by-street basis alongside other low-carbon infrastructure, such as on-street electric vehicle charging points. Importantly, neighbourhoods are co-designed with each community, putting local needs and challenges at the heart of the approach. As a result, WMCA is democratising the social and economic benefits of the transition. 

Matt Croucher is chief commercial officer at Believ, which supports local authorities and private sector clients in creating EV charging infrastructure. He pointed out that the EV adoption trajectory provides confidence we can deliver equitable access to other low-carbon technologies. “Originally, the stereotype was wealthy people buying luxury EVs. Now, when we look at the data, the most utilised chargers are in the likes of east London, used by private hire drivers with high mileage and no access to off-street parking. EVs are no longer the preserve of the wealthy – and with incremental improvements in charging infrastructure, this trend will continue.” 

Carrots alone don’t work – we need sticks too

As one energy provider said: “We’re in the biggest ‘carrot’ period we’ve ever seen for domestic decarbonisation. The sticks are coming, but not fast enough. These sticks must involve a strong, non-shifting government position the ecosystem can coalesce around.” 

Scotland’s April 2024 ban on installing gas boilers in new-build homes was cited as an example. This ban provided much-needed certainty and is successfully driving the adoption of low-carbon technologies. The ULEZ expansion across Greater London has had a similar effect on the adoption of low-emission vehicles. 

The consensus among delegates was that this regulatory line in the sand needs to be drawn quickly. The faster we drive change in new build, the faster it will filter down to retrofit. And that’s when social norms and consumer behaviour will start to change in the mass market. 

There’s lots of optimism to build on

Yes, regulatory uncertainty is a challenge. As are building up supply chains, expanding the renewables skills base, increasing customer trust, and enabling more financing. 

But delegates were clear – the general direction of travel is positive. By coming together to tackle these barriers, the ecosystem can continue driving progress (even if regulation takes longer). As we say so often, close collaboration is essential. 

Our Green Buildings and Transport Network roundtables are great for facilitating that collaboration. Get in touch with Rebecca Teasdale or Steph Budenburg if you’d like to join the discussion and network with other players in the ecosystem.