This includes a dedicated chapter on infrastructure, including actions to build the energy sector’s resilience to climate change. We are committed to ensuring that the cost of the transition to net zero is fair and affordable. We have consistently balanced spending on measures that decarbonise the energy system with the need to help consumers save money on their bills. Thanks to early investment, many low-carbon technologies are now cheaper than their fossil fuel counterparts.
Over 90% of these emissions come from our roads, with passenger cars, heavy goods vehicles and light duty vehicles contributing the most. Despite dramatic progress to improve fuel efficiency of new passenger cars, emissions reductions have been largely offset by their increased use. The system operators need to take on new responsibilities and the regional network owners need to play a more proactive role in delivering an open, flexible and efficient system. For example, the £2 million Modernising Energy Data Access competition will help develop the digital structures needed for innovators to build new apps and products that are compatible across different systems and sectors.
Building on this foundation, we will start a conversation with consumers and the energy industry about the fairness and affordability of the cost of moving to clean energy over the long-term. We are clear that the outcome of this work is a net zero world which continues to ensure a fair distribution of costs and maintains support in society and business for our climate goals. The largest part of our electricity bill is the cost to our energy supplier from buying power. This cost has traditionally been determined by the underlying price of gas or coal but this is changing. Gas will set the electricity price for some years to come but, over time, will do so less frequently, as more and more wind and solar connect to the electricity system.
In November 2020, the Prime Minister announced £1 billion of funding to continue our support for the decarbonisation of buildings through improved energy efficiency. This will be allocated across several existing government schemes, including the Green Homes Grant Voucher Scheme, the Public Sector Decarbonisation Scheme and Social Housing Decarbonisation Fund. Energy efficiency measures help bill payers to reduce consumption and keep bills affordable. Conversely, poor energy performance means that too many bill payers pay more than they should to heat or cool their homes and workplaces comfortably. Ensuring our homes and workplaces use energy efficiently makes good financial sense, as well as supporting better health and well-being. Energy Performance Certificates are required in the UK to provide a prospective owner or tenant with information on the energy performance of a building and recommendations for improvement.
In his Budget of March 2020, the Chancellor committed at least £800 million through the Fund to support CCUS deployment. As announced in the Prime Minister’s Ten Point Plan, we are now raising our commitment to £1 billion up to 2025 to facilitate the UK’s deployment of operational CCUS in 4 industrial clusters by the end of the decade. Developing carbon transport and storage infrastructure will require large upfront capital expenditure, to construct offshore and onshore pipelines and develop storage sites and wells. We will help to put in place this critical network, as the foundation for the scaling up of CCUS across the UK. The process of capturing carbon dioxide from industrial processes, power generation, certain hydrogen production methods and greenhouse gas removal technologies such as bioenergy with carbon capture and storage and direct air capture. The captured carbon dioxide is then either used, for example in chemical processes, or stored permanently in disused oil and gas fields or naturally occurring geological storage sites.
Two funds in the area are good indicators of the potential for investment and funding in the area. The biotechnology and chemical industries create billions of pounds for the UK along with radical new technologies. Funding the biotechnology and chemical industries is crucially important to securing new technologies and supporting the UK jobs market.
The modelled annual energy cost of the average Band C rated home is around £750 less than the average Band E rated home, assuming both homes are being adequately heated (see figure 7.2) . Almost 90% of homes in England currently use fossil fuels, predominantly for heating but also for cooking and hot water. Those that are not connected use mostly oil, liquified propane gas or electricity, or are connected to a shared heat network. While proportions differ between Scotland, Northern Ireland, Wales and England, fossil fuels dominate heating across the UK. We need the energy we use to heat or cool our homes and workplaces to be reliable and affordable, and support comfortable, healthy surroundings in which to live and work. Battery Electric Vehicles are well place to deliver the bulk of decarbonisation for cars and vans and now also smaller HGVs in short distance and medium weight applications, such as urban distribution.
Our support will build on the success of previous funding under the current Energy Innovation Programme. Novel energy storage technologies show promising cost reductions but some have yet to be demonstrated at scale. First-of-a-kind demonstrations are required to enable cost reduction and de-risk private investment. The Prime Minister’s Ten Point Plan announced a further £100 million to address energy storage and flexibility innovation challenges, one of the key priority areas in the over £1 billion Net Zero Innovation Portfolio. The domestic market for smart systems equipment and related services could support 10,000 jobs by 2050, with a further 14,000 jobs supported by export markets. Securing this outcome requires a comprehensive approach, with evolution across all elements of the energy system so that it is fit for the future.
The Industrial Energy Transformation Fund was launched this year, with funding worth £315 million, to help businesses with high energy use to cut their bills and reduce carbon emissions. We will establish a UK Emissions Trading Scheme to replace the UK’s participation in the EU ETS. The UK ETS will be a market-based measure which will provide continuity for businesses. A cap is set on the greenhouse gases that businesses can emit , which will decrease over time. Businesses then buy and sell emissions allowances through government auctions or secondary markets. The UK ETS will initially apply to energy-intensive industries, electricity generation and aviation.
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