Chapter 20: Power Versus Other Sectors - Energy's Place in the Economy

Power Generation versus other emissions

This book is focused largely on energy and specifically electricity. Electricity is expected to be the dominant energy of the future, and is expected to supplant the use of fossil and biomass fuels in most use cases of the 21st century economy. So considering our evolving generation mix is particularly important both and into the future, as the volume of electricity we consume is expected to grow.

That said, in the context of the wider challenge to decarbonise and stop climate change, it's important to see the wider context of how progress in power generation compares to uses of energy.

Countries sign up to climate targets in a number of areas:

Emissions targets There are targets on overall country emissions, such as those agreed at the UN sponsored Conference of Parties (or CoP talks), including the Paris, Copenhagen and Kyoto agreements. These targets are typically in reference to a base emission year (typically 1990), with different consideration for developing countries including rapidly growing China, India etc.

Carbon emissions trading schemes like the EU (and now UK) fit within these targets. They can cover a broad range of sectoral emissions, including aviation, heavy industry and although not yet typically included, potentially agriculture in the future.

As such, these schemes allow for tradeoffs in emission reductions to occur between sectors like power generation and agriculture, rather than being specific or imposing constraints on a specific sector to play a minimum role. Economists like this arrangement because it allows for flexibility and market forces to guide where investment gets the most efficient payback with respect to the emissions avoided. So, if emissions reductions are much cheaper and easier in let's say power generation compared to aviation (which still relies almost 100% on aviation kerosene as a fuel), then this allows for the aviation sector to buy carbon permits off the power generation sector, which can use these to build more wind and solar farms.

Renewable Electricity Targets In addition to broader carbon targets, there have been specific renewable electricity targets imposed either at state/provincial level (e.g. California), national (e.g. UK) or international (e.g. EU) level. These target only the power generation sector, and can exclude the contribution of older renewables like hydro and low carbon (but not technically renewable) nuclear power.

The EU renewable electricity obligations are particularly strict and binding because they are binding individually on each member state and don't allow trading of obligations between each other. So a member state like France, which has >x% of (TODO: number and source) power generation from nuclear power, is nonetheless obliged to achieve over x% of generation from new renewable technologies like wind and solar. While some wind and solar projects are merited in France, the French grid is relatively saturated by its nuclear generation, and in many instances in summer, the French grid operator is effectively curtailing (or turning down) nuclear generation purely to accommodate solar PV (and wind) generation on the grid, which are needed in sufficient quantities across the year to meet France's EU renewables target of x% from renewables by the year x (TODO: number and source). In actual fact, this whole exercise is rather pointless, because the emissions from solar and wind are similar to those from the French nuclear plant, especially at the margin when the nuclear plant might well be turned on anyway.

The short answer is that, while it's safe, turning down nuclear generation for France is pretty pointless, in most cases the only way to do it involves blowing large amounts of steam into the atmosphere to dissipate the heat generated by the reactor. France might just as well curtail its solar generation, but for the obligation the EU imposes on it to generate a certain fraction of its electricity specifically from renewable generation. There is almost no additional marginal emissions of carbon from the nuclear generation.

Another inefficiency of national targets is the inability of EU member states to outsource renewable generation to other countries. For example, there is x GW of solar PV capacity in Germany, but only x GW in Spain and x GW in Italy (TODO: number and source). This is despite both Spain and Italy being significantly sunnier than Germany. Had Germany found a way to invest in solar PV generation across Spain, it could have invested in assets that yielded x kWh of carbon free electricity a year, compared to a maximum of about x kWh per year in Southern Germany. EU emissions as a whole could have been reduced at lesser overall cost or expense to EU households and businesses. However, national priorities continue to take precedence over broader EU objectives.

UK Emission Targets

The UK is actually doing quite well on each of the shorter term emission targets it has signed up to:

Kyoto Protocol - The 1997 international treaty where developed countries committed to reducing greenhouse gas emissions. The UK exceeded its Kyoto target of 12.5% reduction below 1990 levels by 2012, achieving a 23% reduction. Status: Exceeded target.

EU 2020 Targets - While the UK has left the EU, it was previously bound by the EU's 2020 climate and energy package, which included a 20% reduction in greenhouse gas emissions, 20% renewable energy share, and 20% improvement in energy efficiency compared to 1990 levels. Status: Net emissions target (43% reduction), exceeded renewable target (42% share), exceeded efficiency target (24-26% improvement).

Paris Agreement - The international climate accord signed in 2015, where the UK committed to limiting global temperature rise to well below 2°C above pre-industrial levels, with efforts to limit it to 1.5°C. The UK's Nationally Determined Contribution (NDC) pledges a 68% reduction in emissions by 2030 compared to 1990 levels. Status: On track for 2030 target, with approximately 53-55% reduction achieved by 2024 (provisional).

Clean Power 2030 - The UK government's commitment to decarbonise the electricity system by 2030, ensuring 95% of electricity comes from low-carbon sources. This includes phasing out unabated gas-fired power generation and expanding renewable energy capacity. The target under the Conservative administration had been set to 2035; on coming into office Labour accelerated this to 2030. Status: Target date 2030, current progress shows approximately 58-60% low-carbon electricity in 2024.

Gas Boiler Phaseout - The UK government has set different targets for new builds and existing homes. New builds will be banned from installing gas boilers from 2025, while existing homes will face a complete ban on new gas boiler sales from 2035. This phased approach recognises the greater difficulty of retrofitting existing properties compared to building new homes with low-carbon heating systems from the start.

Petrol/Diesel Vehicle Phaseout - The UK has committed to ending the sale of new petrol and diesel cars and vans by 2030, with hybrid vehicles allowed until 2035. This target was originally set by the Conservative government in 2020 and has been maintained by Labour, aiming to accelerate the transition to electric vehicles.

Net-Zero 2050 - This is by far the biggest, most ambitious and most long-term target, encompassing all the others as intermediate stepping stones. The legally binding target under the Climate Change Act 2008 (amended 2019) requires achieving net-zero greenhouse gas emissions across the entire UK economy by 2050. This covers all sectors including power, transport, buildings, industry, and agriculture. The intermediate targets we've already hit and in some cases exceeded significantly are in effect the low-hanging fruit. Much of what remains are the hardest sectors to decarbonise: transport, buildings, and heavy industry, where emissions are deeply embedded in infrastructure, consumer behavior, and fundamental production processes. Status: Long-term target, progress being monitored by the independent Climate Change Committee.

When you dig into the composition of existing progress on the intermediate targets, there's considerable variation between sectors:

Power Generation - Has seen the most radical decline in emissions, falling by 73% since 1990 due to coal phase-out and renewable expansion. As recently as 2012 it was still at a staggering 40% of power generation. Coal power produces about 800g/KWh of CO2, making it about the worst way from a climate perspective of generating power; gas generation in contrast produces around 400g/KWh of CO2. Coal was effectively eliminated from regular generation in 2024. Today's generation mix shows wind and gas as joint first/second (each around 30-35%), followed by nuclear (15%), imports (10-15%), and solar (5-10%). Power consumption in 2024 was also around 15% lower than 1990, reflecting energy efficiency improvements like LED lighting and general appliances.

Transport - Has seen the least progress on emissions reduction, with only a 3% decline since 1990. Electrification remains minimal: electric vehicles accounted for just 2% of the UK car fleet in 2024, and electric trucks and buses are virtually non-existent. This is despite significant efficiency improvements in internal combustion engines - modern petrol, diesel and aviation engines are 20-30% more efficient than their 1990s counterparts. However, these efficiency gains have been largely offset by continued growth in transport volumes - passenger car traffic increased by 25% between 1990 and 2019, while flight passenger numbers more than doubled. The sector's emissions have been stubbornly resistant to policy interventions, with road transport still responsible for around 90% of transport emissions and aviation for most of the rest.

Buildings - Have seen moderate progress with emissions falling by around 25% since 1990, though this masks significant variation between domestic and commercial properties. Domestic buildings have achieved the most improvement through better insulation, more efficient boilers, and the gradual phase-out of coal and oil heating. However, progress has been uneven - while new builds are well insulated, the UK's ageing housing stock remains a major challenge. Around 85-90% of homes are heated with natural gas, with gas boilers remaining the dominant heating system and heat pumps accounting for less than 1% of domestic heating systems despite generous government subsidies. Commercial buildings have in some ways fared better, with many already using air conditioning (HVAC) systems for heating and cooling which have automatically benefited from the improvements in power generation. However, many older commercial buildings remain poorly insulated by international standards, and the prevalence of renting creates little incentive for landlords to invest in energy efficiency upgrades. The policy inconsistency is striking - domestic buildings face no carbon pricing on their gas consumption, while large commercial buildings are subject to the Climate Change Levy, creating a perverse incentive to keep gas boilers in homes while commercial properties face pressure to electrify.

Industry - Has seen significant progress with emissions falling by around 45% since 1990, though this masks dramatic variation between sectors and the reality of offshoring. Heavy industry like steel, cement and chemicals has achieved improvement through process efficiency gains, fuel switching from coal to gas, and the closure of some of the most carbon-intensive facilities. However, much of this apparent progress reflects the offshoring of carbon-intensive production to countries with lower environmental standards - Britain's steel, cement and chemical production has declined significantly since 1990, while imports from high-emission countries have increased. The sector's emissions have been more responsive to policy interventions than transport or buildings, but this is partly because carbon pricing and efficiency standards made it cheaper to import than produce domestically. The high cost of deep decarbonisation technologies like hydrogen and carbon capture remains a significant barrier, while offshoring continues to shift emissions rather than eliminate them.

Agriculture - Has seen modest progress with emissions falling by around 15% since 1990, though this masks significant changes in both production methods and consumption patterns. The sector has achieved improvements through better fertiliser management, reduced methane emissions from livestock, and some efficiency gains in crop production. However, progress has been uneven - while some farmers have adopted more sustainable practices, others continue with intensive methods that maximise yields at the expense of environmental impact. The most significant change has been in dietary habits, with per capita meat consumption declining by around 15% since 1990, particularly red meat, which has the highest carbon footprint. However, this reduction has been partially offset by population growth and increased consumption of dairy products. Much of the apparent progress reflects the offshoring of food production to countries with lower environmental standards, with UK food self-sufficiency declining from around 75% in 1990 to under 60% today. The sector's emissions have been relatively resistant to policy interventions, with the post-Brexit Environmental Land Management scheme replacing the EU's Common Agricultural Policy but still struggling to balance food production with environmental goals. The continued tax breaks on red diesel for agricultural machinery actively encourage high-emission practices, while the high cost of transitioning to regenerative farming practices and the lack of carbon pricing on agricultural emissions remain significant barriers to faster decarbonisation.

Waste - Has seen significant progress with emissions falling by around 60% since 1990, though this masks important distinctions between different types of emissions and broader environmental benefits. The sector has achieved dramatic reductions in methane emissions from landfill through improved gas capture systems and the gradual phase-out of organic waste disposal. Methane is the same chemical molecule as natural gas; when released unburnt into the atmosphere it is a different greenhouse gas to CO2, but with 25 times more global warming potential over a 100-year period. However, progress outside methane has been more mixed. The UK's recycling rates have improved from around 5% in 1990 to over 45% today, reducing the need for virgin materials and their associated emissions. However, much of this apparent progress reflects the offshoring of waste processing to countries with lower environmental standards, particularly for plastics and electronics. The sector's emissions have been more responsive to policy interventions than transport or buildings, with landfill taxes and recycling targets driving meaningful change. However, the high cost of advanced waste treatment technologies and the continued export of difficult-to-recycle materials remain significant barriers to achieving truly sustainable waste management.

Decarbonisation of power generation is broader

The stark variation in progress between sectors reveals a fundamental challenge for the UK's net-zero ambitions. While some sectors like power generation have achieved dramatic emissions reductions, others like transport and buildings remain stubbornly resistant to policy interventions. This uneven progress suggests that the UK has exhausted most of the "low-hanging fruit" - the relatively easy emissions reductions from fuel switching, efficiency improvements, and technological upgrades.

In the contemporary narrative, there is a perception that the power generation sector in Britain in particular has failed to decarbonise at an affordable cost. While there are many mistakes documented in this book which explain how the decarbonisation of power generation has undertaken could have been cheaper, we need to acknowledge:

1. Power generation started in a relatively poor position. Unlike countries with significant hydro (Nordics) and nuclear (France) generation, Britain was highly dependent on coal generation. As a result, it has gone through two transitions over 30 years:
   • First, moving from coal to gas (1990s-2000s)
   • Second, moving from gas toward wind, solar and greater imports (2010s-2020s)
2. The investments in power generation e.g. synergising new technologies like wind and solar, are foundations upon which much of the upcoming decarbonisation of buildings, transport, industry will be built. The challenge for the power generation sector is also much broader given the dependency on electrification of decarbonisation to other sectors like transport, buildings and industry. UK electricity demand could double, from about 300TWh/year to 600 TWh/year by 2050.
3. If buildings, transport and industry had decarbonised faster over the last 30 years, the power sector would have struggled to meet the increased electricity demand with clean generation. The explosive growth of data centres and AI computing is creating unprecedented electricity demand that was never anticipated in early decarbonisation plans, potentially derailing progress on power sector emissions. UK data centres already consume around 15 TWh annually - equivalent to 5% of total electricity demand - and this could triple by 2030 as AI applications scale up, adding another 30 TWh of demand that wasn't factored into net-zero planning.
4. The shift toward gas for power generation coincided with the decline of domestic reserves in the North Sea and closure of UK coal pits. Even with Clean Power 2030, unless there is a rapid acceleration of Building decarbonisation in particular, we will remain very exposed to LNG imports especially in the winter months. That said, given that coal supplies were frequently disrupted by industrial action in the 1970s/80s, this instability isn't that novel to the UK.

Perfection versus pragmatism

Going coal free

Considerable media attention was given as, one-by-one over the last 15 years, coal plants were decommissioned across Britain. These moments were significant for the workforce and local communities, marking the end of decades of industrial heritage.

Non-Carbon Emissions

In some instances, coal plants were retired earlier than expected primarily due to local air pollution concerns rather than climate change. Cockenzie near Edinburgh closed in 2013 after failing LCPD compliance on sulphur dioxide and nitrogen oxide emissions, while Kingsnorth in Kent (30 miles from London) was mothballed in 2012 rather than invest in expensive emissions control equipment. The health impacts of coal pollution are severe and well-documented. A 2016 EU study found coal plants in Britain contributed to around 1,600 premature deaths annually, with communities within 30 miles of power stations showing significantly higher rates of respiratory diseases, heart conditions, and certain cancers.

Carbon Free Hours

Similarly, in the energy sphere, there was for much of the last 5-10 years a fixation on the number of coal-free running hours on the national grid. As coal plants retired, these periods extended dramatically, so that by the time the last few coal plants remained at Radcliffe on Soar and West Burton, coal generation was only used during the coldest weeks of winter when demand peaked and renewable generation was low. At various points, these coal power plants in their final were also operated under emergency reserve contracts by National Grid rather than selling their output on the open market.

Lost Opportunity - given our lack of gas storage

More generally, what matters is the total volume of carbon emissions from all generation sources combined. While there's something discrete and tangible about whether coal power stations remain on the grid, the broader question is whether Britain has truly moved beyond fossil fuel dependency.

In the coming 5-10 years, legitimate concerns exist about the power grid's capacity to meet peak energy demands, particularly as heat pump adoption accelerates. While these risks are often amplified by climate sceptics seeking to discredit renewable technologies, dismissing them entirely would be unwise. The reality lies somewhere between alarmist rhetoric and complacent optimism.

One of the UK's biggest energy weaknesses is its lack of gas storage. The UK has only around 1.5 TWh of gas storage, enough for about 4-5 days of supply. Given the proximity of the North Sea, gas storage was never seen as a priority. In countries with longer traditions of importing gas, such as Germany, there is around 24 TWh of gas storage, which can meet 80-90 days of peak winter demand.

This vulnerability is compounded by a fundamental characteristic of British winter weather: air temperature is negatively correlated with wind speed. British winters typically oscillate between two weather modes: low-pressure systems bringing mild, wet, windy conditions from the Atlantic, or high-pressure systems bringing cold, dry weather from the east. The former is excellent for wind generation and reduces electric heating demand, especially with heat pumps that are 250% efficient at 10°C but only 200% efficient at 0°C. The latter is poor for wind generation (though cold air is denser and can improve wind turbine performance slightly) and dramatically increases electric heating demand.

This creates a fundamentally different energy system dynamic. Traditionally, gas demand for heating was roughly linear with outdoor temperature - gas boilers consumed proportionally more fuel as temperatures dropped. But in a decarbonised heating system, the relationship becomes exponential. When temperatures fall below freezing, heat pump efficiency plummets while demand soars, requiring massive amounts of electricity generation. Since this electricity must come from gas-fired backup plants during Dunkelflaute events, the gas demand curve becomes much steeper and more volatile than the old linear relationship.

The result is a perfect storm: the weather conditions that maximise heating demand (cold, still) simultaneously minimise renewable generation (no wind), while the conditions that maximise renewable generation (mild, windy) minimise heating demand.

Even as UK gas consumption declines with home decarbonisation, switching between these weather modes could create significant swings in gas demand for power generation. While the absolute volatility of gas demand will certainly fall as fewer homes use gas directly for heating, in relative terms it could actually increase. With a smaller overall gas market, the same absolute demand swing represents a larger percentage change, making the system more sensitive to weather variations and supply disruptions. This volatility exposes the fundamental weakness of relying on gas as the primary backup for renewables.

Given this challenge, it could have made sense to maintain some coal power stations as strategic reserves. Unlike gas power plants, coal can be stored in dense form adjacent to power stations without the massive investment required for underground gas storage infrastructure. A week or two's supply of coal would have been sufficient to manage many 1-in-5 or 1-in-10 year cold snaps, or to handle unexpected disruptions like sabotage of undersea cables or LNG terminals. Such strategic reserves would have provided a crucial buffer against the volatility of the decarbonised energy system while requiring minimal ongoing investment.

The human cost of energy system failures during extreme weather events should be weighed against the environmental damage from short-term coal generation. Prolonged blackouts in winter, particularly for vulnerable populations, could result in significant health consequences and economic disruption. Decarbonisation policy needs to balance these competing concerns.

The economics of maintaining such reserves are not trivial - the UK already spends £21 per household annually on the Capacity Market to keep backup power plants available. However, the cost of maintaining mothballed coal plants as strategic reserves would likely be significantly lower than building new gas storage infrastructure, particularly when accounting for the value of energy security during extreme events.

Hybrid compromises

Until power grids are 100% renewable, all heat pumps and electric vehicles connected to the grid will effectively run on a mixture of fossil fuel-generated power and renewables. The exact split depends on when they're used and what weather conditions prevail at that moment. A heat pump running on a cold, still winter evening might be powered 80% by gas and 20% by renewables, while the same heat pump on a windy spring afternoon might run 90% on renewables.

On average for a heat pump, a recent study by academics working for Octopus Energy estimated the current reduction in gas usage being around 90%. That figure accorded with rough hypothetical calculations I did on my own home (about 85%); and the saving figure will trend up to reach 100% as the rest of the grid decarbonises. For the UK's energy security as a net importer of gas this is a big improvement; and heating buildings accounts for around 40% of our current use of natural gas.

The principal deterrent to heat pump installation is often the upfront capital cost, particularly in older buildings with poor insulation or limited space for the larger radiators and hot water cylinders that heat pumps require. Heat pumps work most efficiently at lower flow temperatures (typically 35-45°C) compared to gas boilers (60-80°C), which means they need significantly more radiator surface area to deliver the same heat output. This usually requires either upgrading to larger radiators or installing underfloor heating systems, which provide even greater surface area but are expensive and disruptive to retrofit. Current regulations for government grants demand systems capable of heating homes to comfortable temperatures even on the coldest winter days - typically when outdoor temperatures reach -1°C in the south of England to -3°C in northern Scotland. For such challenging properties, hybrid heat pump systems could offer a practical compromise.

Similar to plug-in hybrid cars that switch between battery power and petrol, hybrid heat pump systems could meet 80-90% of a building's heating needs with electricity, using gas or oil only as backup during extreme cold when heat pumps become inefficient and the power grid is strained. For rural properties, this backup could also include wood-burning stoves or open fires, which many homeowners install anyway for aesthetic or practical reasons. Such secondary heating systems provide crucial resilience during power cuts, which are becoming more frequent and severe due to climate change and increasingly extreme weather events. By taking the strain off heat pumps at lower temperatures, this secondary heating also boosts the average efficiency of the heat pump system overall, since heat pumps operate most efficiently when not pushed to their performance limits. This hybrid approach would reduce both the upfront cost of retrofitting and the broader grid infrastructure costs needed to support full electrification, while also boosting consumer confidence by addressing the fear - however well-founded - that heat pumps might not work in all conditions. This inertia was and still is an important decision factor, similar to range anxiety with EVs.

Another hybrid approach keeps the existing combi-boiler for hot water while adding air-to-air heat pumps for space heating and cooling. This gives homeowners unlimited hot water on demand without sacrificing floor space to a water cylinder. The air-to-air system - essentially reversible air conditioning - provides both heating in winter and cooling in summer, making it particularly attractive for urban properties like small flats and terraced houses that often overheat during warm weather.

Regrettably, the Government hasn't yet considered either of these hybrid options, though it is considering air-to-air heat pumps for properties with an electric cylinder or way of heating water.

The perfection trap This obsession with achieving perfect, 100% renewable electricity before electrifying other sectors creates a dangerous delay. Britain could have made much faster progress on transport and building decarbonisation by accepting that electrification would initially be partially fossil-fuel powered, rather than waiting for the perfect renewable grid. The result is that sectors that could have been electrifying for the past decade are still waiting for the power sector to achieve perfection, while emissions from transport and buildings continue largely unabated.

Conclusion: The Perfectionism Paradox

The UK's decarbonisation journey reveals a fundamental tension between two approaches to climate action. On one side stands the perfectionist approach: waiting for complete renewable energy systems before electrifying other sectors, insisting on 100% clean solutions, and rejecting any technology that doesn't achieve zero emissions. On the other side stands pragmatism: accepting incremental progress, embracing hybrid systems, and recognising that partial decarbonisation today often achieves more than perfect decarbonisation tomorrow.

The evidence from Britain's energy transition is clear. The power sector has achieved a 73% emissions reduction since 1990, largely through the "dash for gas" and renewable expansion. Yet transport emissions have fallen by only 3%, and building emissions by just 25%. This stark contrast reflects not technological limitations, but policy choices that prioritized perfect solutions over practical progress.

The perfectionist approach has created several perverse outcomes. By eliminating coal entirely rather than maintaining strategic reserves, Britain has increased its vulnerability to gas supply disruptions during extreme weather events. By insisting on full heat pump adoption rather than hybrid systems, the government has slowed building decarbonisation and increased costs for homeowners. By waiting for perfect renewable grids before electrifying transport, Britain has delayed the transition to electric vehicles.

The pragmatic alternative recognises that decarbonisation is a journey, not a destination. Hybrid heat pump systems that achieve 60-70% emissions reductions are better than no heat pumps at all. Strategic coal reserves that provide energy security during extreme events are better than blackouts that endanger vulnerable populations. Partial electrification that begins immediately is better than perfect electrification that never starts.

This is not an argument for abandoning climate ambitions or accepting continued fossil fuel dependence. Rather, it's a recognition that the path to net-zero requires balancing environmental goals with practical constraints, economic realities, and human welfare considerations. The UK's current approach of eliminating coal entirely while building massive offshore wind capacity has created a system that's both more expensive and less resilient than necessary.

The lesson for policymakers is clear: perfect should not be the enemy of good. Britain's energy system would benefit from embracing hybrid approaches, maintaining strategic reserves, and accepting that decarbonisation happens in stages. The goal should be maximum emissions reduction at minimum cost and disruption, not ideological purity at any price.

As the UK faces the challenge of doubling electricity demand by 2050 while maintaining energy security, the choice between perfectionism and pragmatism becomes increasingly urgent. The perfectionist approach risks creating an energy system that's both expensive and fragile, while the pragmatic approach offers a path to rapid, cost-effective decarbonisation that builds resilience rather than vulnerability.

The question is not whether Britain should decarbonise - that's already decided. The question is how to do it in a way that maximises environmental benefits while minimizing economic and social costs. The answer lies not in waiting for perfect solutions, but in embracing the messy, incremental reality of energy transitions. Britain's energy future depends on choosing pragmatism over perfectionism, and progress over purity.