Energy Transition Outlook 2019

TR & NSITION ENERGY

Energy Transition Outlook 2019

Net-Zero Emissions, Investment and the Economy: The Great Challenge

The reduction in UK GHG emissions achieved since 1990 has already required significant investment across a range of technologies. The largest investment has been in power generation. Meanwhile investment in energy efficient appliances has also been significant. Yet achieving net-zero will require further step changes in the way we produce and use energy in the UK. Additional capital expenditure equivalent of 1–2% of GDP on an ongoing basis is expected across a range of technologies in support of a decarbonised economy. This could increase total annual energy sector investment from around £20–25bn to around £40–50bn. These rates of investment are an increase on past levels but are considered achievable with the correct regulatory frameworks. It is important to note that the UK will still require continued oil and gas investment alongside renewable and other low-carbon technologies. This will maintain the UKCS as a competitive basin providing a significant share of energy needs and continuing to make a strong contribution to the UK economy both during and after the transition period, in terms of gross value added and employment in

both operators and the supply chain. Without continued investment into oil and gas, UK production would quickly decline and cease, and be replaced with imports. Both at global and UK level, projections consistent with the Paris agreement underline a continued requirement for oil and gas investment and production, albeit at lower levels than today. The indicative projections in the CCC report include a reduction in crude oil consumption of three-quarters by 2050, although this figure does not include ongoing demand for oil as a feedstock. By contrast, gas consumption remains at around two-thirds of current levels in 2050, albeit with most of this being used in decarbonised form. Overall, in this scenario the share of oil and gas in primary energy supply would need to fall from around three-quarters today to one-third by 2050. Changing these inherent demands will not be a simple task and government policy will need to work with individual consumers’ needs to be successful.

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