The world is changing. Over the next half century our use of fossil fuels will greatly diminish. The UK and most of the rest of the world will transition to using green energy sources. That means more electric vehicles and a shift to renewable energy.
Two undeniable realities are converging to force the pace of that change.
The first is the global climate emergency. To keep global warming in check we must reduce carbon emissions and, to do that, we must move away from using fossil fuels. The world has no real choice.
The second challenge is the simple fact that, sooner or later, the world will start running out of fossil fuels to burn. Up to now, this date still appears far off. New technologies and the discovery of new reserves means we are unlikely to run out any time soon. Nevertheless, the fact remains that fossil fuels are a finite resource. At some point or other, we will have to shift to alternatives.
Cost and Opportunity
Often, we see the shift to greener energy as a necessary cost, the price we must pay for preserving our environment and securing our future survival. Indeed, there is no denying that a shift to a greener economy does require investment over the short to medium term. Electric vehicles are still more expensive to buy new than conventional ones. Installing solar panels or geothermal heating requires an (often hefty) initial investment.
However, the shift to greener energy is also an opportunity. The whole world is changing – not only the UK, but every country is challenged with making the same transition. Such a radical shift requires significant investment, new technology, new infrastructure and all the ancillary products and services that accompany that. It is therefore also an opportunity. Those who lead the way and grasp that opportunity will be well placed to capitalise on it in the future.
Some of the world’s largest and most profitable companies today are oil and gas companies. Their wealth and success stems from the fact that they are central to supplying the world’s economies with energy today. It therefore follows that, in the long term, those businesses that lead the way in the green economy of the future, have similar success to look forward to.
Green energy in the UK
The process of transitioning to a greener economy is already well underway.
Today the UK generates 48.1% of its electricity from renewables. There is still a long way to go but when you consider that figure was only 21.3% a decade ago, things are clearly changing fast.
In the past year (up to the autumn of 2023), 55% of all new vehicles registered in the UK were either electric or hybrid. 16.4% were pure electric vehicles, up from a virtually negligible proportion (1.7%) only four years ago.
So, there is no doubt that the UK is making progress. However, we are not at the very forefront of change. If we consider the ten largest western and central European countries by population, the UK only ranks 7th highest in terms of the proportion of our electricity requirement generated by renewables. Sweden is way ahead of us (77.5% renewables). Romania, Germany, Netherlands, and Spain are also significantly ahead (in all cases generating over 58% of their energy requirements from renewables).
Renewable Electricity Generation in the UK
Here in the UK, we don’t get much sun, so we can’t generate as much electricity from solar power as many other countries. However, the UK is quite windy. As a result, over half of our renewable energy is generated by wind turbines.
Our island coastline makes offshore wind a particularly appealing option. Indeed, the UK generates more electricity from offshore wind power than any other country except China. In terms of offshore wind power, the UK is well placed to lead the way.
Despite all that has been achieved so far, a CBI report from January 2023 warned that the UK is in danger of falling behind. Investment by the UK government in tackling climate change is now beginning to run behind some of our key international competitors.
As a result, over the past two years or so, the UK’s share of emerging green markets has remained static or even gone backwards. Our share of the offshore wind cabling market is unmoved at 12%. 12% sounds a lot, until you consider that the UK accounted for 27% of global capacity for offshore wind in 2022.
By a similar token, our share of EV assembly has fallen from 6% to 5%; our share of EV batteries from 2% to 1% and of hydrogen electrolysers from 6% to 2%.
A recently published survey by EY warned that the attractiveness of the UK for clean energy investors has fallen from fourth to seventh in the international rankings.
The past year has also witnessed Britishvolt, a UK flagship lithium-ion battery manufacturing venture, go into administration. The Australian owned Recharge Industries have been attempting to revive the project ever since. However, at the time of writing, its future still looks most uncertain.
The UK has made good progress in transitioning to a green economy thus far. We are still well placed to capitalise on the opportunities this transition will bring. However, there is no denying that things have stalled somewhat of late. Investment has levelled off and is being surpassed by international competitors. The UK has ambitious targets but there is little by way of any detailed long-term industrial strategy in evidence. The government’s recent back-peddling demonstrates a relatively lukewarm commitment to drive things forward.
All this recent reticence to make detailed plans or commit to significant further investment no doubt helps balance the books in the short term. However, short-term cost savings could lead to the UK paying a bigger price in the longer term (especially if short term becomes medium term).
83% of businesses at a Chamber of Commerce event at the Eden Project on 27th September thought that recent government back-peddling on net zero policies were unhelpful for business. Indeed, only 2% thought they were helpful.
But let’s be positive. It is by no means too late to address these setbacks. The UK is still well placed to take advantage of the emerging green economy. Even as I am writing this piece, the UK government announced it will be increasing the amount paid for offshore power. This should help to kickstart an erstwhile stalled offshore sector. It’s a start at least.
However, whether the UK keeps pace with our international competitors or not, there is no doubt that the world is transitioning from the age of fossil fuels to the age of renewables. Those who lead the charge and remain at the forefront of this green revolution will be well placed to reap significant rewards in the future. The UK still has plenty of opportunity to capitalise on this. Let’s hope it does. It would be a great shame if these opportunities were squandered.
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