UK sectors face system shocks during net-zero transition
The road to net-zero emissions in the UK will create system shocks and disruption that will hit organisations across the electricity, heat, transport and construction industries the hardest, according to new research published by the UK Energy Research Centre (UKERC).
Published today (19 June), the report notes that all businesses will need to make “fundamental change to their business models and operating practices” in order to transition to a net-zero economy, but that the actual pathways to this change remain undefined.
The report notes that the heat, transport, electricity and construction industries will be severely disrupted by the transition. The report claims that the extent, nature and impacts of the transition are “subject to a lot of uncertainty” but that firms should adopt a “flexible and adaptive approach” to policy development and implementation and technological innovation.
UKERC’s director and professor of energy policy at UCL Jim Watson said: “The move to legislate for net-zero is welcome progress, but we need economy-wide action to make this a reality.
“This includes policies that deliberately disrupt established markets and business models in some sectors – and address any negative impacts.”
The report notes that some sectors may need to be “deliberately disrupted” by policy and legislation if they are to be compatible with a net zero economy.
For heat, a “patchwork mix” of different low-carbon solutions will need to emerge, with policy needed to drive decarbonisation in an industry that has been historically slow to reduce emissions.
Widescale disruption has already occurred in the electricity sector, with the Big 6 realigning strategies and business models to account for climate change, low levels of trust and new entrants emerging in the market. However, the report is unable to clarify whether the new entrants will become incumbents in the future.
For construction, major reductions in the energy demand of existing buildings are required, while businesses within the sector will also need to decarbonise how they operate.
The Government’s Road to Zero strategy, detailing how a £1.5bn investment into electric vehicle (EV) research, development and infrastructure will help phase out petrol and diesel sales by 2040, means that a system shock is less likely in the transport sector.
However, the report warns that the strategy is not enough to reach the newly announced net-zero target and that vehicle manufacturers, the maintenance and repair sector and the Treasury may all feel the strain of accelerated decarbonisation.
UKERC’s co-director and professor of transport and energy at the University of Leeds, Jillian Anable, added: “The UK transport sector is nearly 100% fuelled by fossil fuels, with only tiny niches of electrified and bio-fuelled vehicles.
“Whilst politically challenging, the sector can only hope to reach ‘net-zero’ through whole-scale change that involves reducing hyper-mobility and fuel switching. This will lead to disruption to actors, global networks, governance and lifestyles.”
The UK’s transition will be dominated by “technological substitution” across these sectors, the report notes. Low-cost battery storage technology, runaway climate and weather-related incidents, low-cost renewables and the failure of carbon capture and storage (CCS) to be available at an affordable cost were highlighted as the most likely disruptions facing the sectors.