Policy Brief - Climate change

Key points

Action by National Grid to tackle climate change needs to occur on three levels:

  • Embedding a target of 80% greenhouse gas reduction across its businesses by at least 2050. With a mid term reduction target of 45% by 2020.
  • Reshaping markets by aligning regulatory and public policy incentives, such as removing the revenue drivers for energy companies to encourage greater energy use by their customers, and moving to a low-carbon economy through carbon trading mechanisms and clear legislation.
  • Encouraging businesses, organisations and individuals to meet the climate change challenge and embrace energy efficiency.

 

The policy context

The overwhelming body of scientific evidence shows that the earth’s climate is rapidly changing, predominantly as a result of greenhouse gases caused by human behaviour. Addressing climate change is now a top policy priority.

The UK’s Climate Change Act (2008) set a target of reducing greenhouse gas emissions by 80 per cent by 2050, with an interim target for CO2 reduction of at least 26 per cent by 2020.

The European Union has signed onto a target to reduce greenhouse gas emissions at least 20 per cent by 2020.

Many states in the Northeast United States, such as New York and Massachusetts, have enacted legislation to address climate change through the Regional Greenhouse Gas Initiative (RGGI), which National Grid fully supports. Climate change also has been progressing through the US Congress, with a bill now pending in the Senate.  National Grid has joined the Clean Energy Group to actively support this legislation.  It is unlikely, however, that climate change legislation will be passed in this Congress due to competing issues facing Congress.

 

Moving to a low-carbon economy

A diverse range of technologies and fuel sources will be needed to achieve the above targets. A key driver will be the price of carbon and whether this is strong enough to influence early investment decisions.

Globally, National Grid supports proposals to provide a framework post-2012 for linking carbon trading mechanisms around the world. This will improve the liquidity of carbon trading and allow climate change to be tackled globally in the most efficient way.

Within Europe, the key CO2 cap and trade programme is the EU Emissions Trading Scheme (EU ETS), which focuses on emissions from electricity generation and major energy users. The EU ETS should ensure that there are consistent and demanding allocation plans across all EU Member States to ensure robust allowance prices. Future inclusion of other greenhouse gases would also help to drive innovation.
In the US, National Grid supports the creation of a consistent and equitable approach at a federal level to greenhouse gas reduction through a market-based cap and trade scheme. This should include all types of greenhouse gas emissions and cover all sectors. This will allow trading across state boundaries and outside the US.

 

Creating low-carbon energy markets

The best way to provide incentives for low-carbon energy is by working with the market frameworks. At the moment, there are barriers to low-carbon energy markets and they need to be removed.

In both the UK and the US, regulation needs to be aligned with public policy to incentivise energy savings and not energy use. Importantly, volume drivers need to be removed from energy regulation in order to decouple energy use from the revenue an energy company receives. National Grid also supports measures such as encouraging the development of smart metering, new tariffs and better billing that will help and encourage consumers to value the energy they use.

Regulation and tax mechanisms should also be used to incentivise the reduction and leakage of greenhouse gases, such as incentivising investment to reduce greenhouse gases not covered by cap and trade schemes through price controls / rate plans, or through allowing increased capital allowances or accelerated depreciation.

National Grid will also need to make more investment in its energy networks in order to connect low-carbon technologies, such as renewables (biomass, wind, wave, solar, low-impact hydro), as well as strengthen the energy system. Regulation and public policy should work together, providing a clear and stable framework to encourage investment that fits the longer-term energy needs of consumers.

In the UK, around 70 per cent of renewables that seek to start generating in the next four years are awaiting planning permission. The creation of the Infrastructure Planning Commission (IPC), which balances the concerns of affected parties with the increasingly urgent need to develop this infrastructure, was a progressive solution. The UK also urgently needs a clear, workable regulatory framework for offshore transmission to connect new wind, wave and tidal projects, and this policy needs to be aligned with the onshore regime to prevent any barriers to timely investment.

In the US, the policy/regulatory focus should be on creating a goal to reduce carbon emissions. Incentives are needed to accelerate development of new technologies to reduce greenhouse gas emissions, and encourage adaptation of goods and services to cope with a changing climate.

 

Reshaping National Grid into a low-carbon business

All organisations must play a part in tackling climate change. National Grid’s climate change strategy has a target of reducing greenhouse gas emissions from our processes, operations and offices by 80 per cent before 2050, with an interim target of 45 per cent by 2020. Key areas for National Grid to address include methane leakage and venting from its gas networks. It has a major ongoing programme of replacing old cast iron pipes with modern polyethylene pipe. This is reducing leakage from its UK and US distribution systems year on year. A programme of installing new compressors at key sites in the UK will also reduce emissions on its gas transmission system.

National Grid is also seeking to reduce emissions from its own energy use. It is seeking to procure more of the electricity it uses from renewable sources in the future, as well as implementing better energy efficiency measures.

Two key elements of National Grid’s Climate Change Initiative are also: putting in place carbon budgets within each Line of Business to further reduce greenhouse gas emissions; and using a Shadow Price of Carbon (SPC) in all the company’s economic decisions.

 

New and alternative technologies

National National Grid continues to investigate new and alternative technologies to help it reduce its impact on climate change, as well as adapting existing technologies to the changing climate.

National Grid is focusing on advanced smart metering services that will help inform and change consumer behaviour, and give better system information to enable National Grid to operate its networks more efficiently. National Grid is actively pursuing smart metering trials
in the UK and the US, as well as smart grid projects. Smart grids can more accurately predict usage, allowing the network operator to use the network more efficiently to meet demand.

National Grid is also putting pilot projects in place in London to capture the energy used to move gas around its gas networks. This energy, that would otherwise be lost, will be used to generate electricity.

National Grid is leading the UK’s Carbon Capture and Storage (CCS) industry development, helping to demonstrate deployment of CCS by developing CO2 transportation proposals. CCS represents an opportunity to significantly reduce CO2 emissions from fossil fuelled power stations. For more information please visit National Grid Carbon Ltd's pages.

At its UK Grain Liquefied Natural Gas (LNG) importation facility, National Grid will use the heat from a nearby power station that would otherwise be wasted to warm the liquefied gas in order to regasify it. This avoids the need to burn additional gas as a heat source.

Policies to promote renewable heat are also required to meet long-term climate change targets. Government should incentivise grid-injected bio-methane producers to reduce methane and carbon emissions.

 

Promoting energy efficiency

National Grid also plays its part in influencing and helping individuals to become more energy efficient; reduce their energy usage; and switch to lower carbon-intensity fuels, such as from oil to gas. It is also changing its customer bills in the US to show the carbon emitted from their own energy use.

In both the UK and the US, it runs schemes to help its communities play their part. In the US, National Grid’s award-winning energy efficiency programmes have helped consumers, ranging from low-income customers to large industrial businesses, reduce their consumption by 2.1bn MWh since 1987. It has also been very active in tackling fuel poverty in the UK and is committed to help one million homes with energy efficiency measures through its Affordable Warmth Programme.

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More Information

Carbon Capture and Storage (CCS)

Carbon Capture and Storage diagram

CCS networks in the UK could stop up to 78m tonnes of CO2 going into the atmosphere annually - equivalent to taking nearly all of Britain’s cars off the road.

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