Green is the New Black

A Roundtable Discussion

Introduction

The UK’s greenhouse gas emissions in 2020 were 51% below 1990 levels, according to new Carbon Brief analysis, which means the UK is now halfway to meeting its target of ‘net zero’. We’re clearly on a threshold of real change, so how are businesses defining their decarbonisation priorities and at the same time ensuring their business model remains relevant against the backdrop of ESG, risk and profitability? And what are the hurdles to overcome for a decarbonisation rollout?

We invited guests to an online event to help answer these questions from their different industry perspectives on how they see the UK reaching net zero by 2050.

Automotive

In the automotive sector the ‘genie is out of the bottle’ and more and more OEMs are delivering EV products at pace and at scale. Only 5 years ago there were two views, the first, decarbonisation needs to happen, the second that the internal combustion engine would be the dominant technology and EVs were way off in the future and weren’t ever really going to work. So, what’s happened? Tesla has shown that these products can work in the real world and broader knowledge and education has fed demand. Then the first lockdown and associated cleaner air, led many to question whether we really wanted diesel products around our cities, and of course, regulation has driven changes in the automotive industry.

The UK targeting 2025 and 2035 gives people the milestones to aim for. However, the demand for lower carbon is challenged as EVs are still expensive. Billions needs to be invested in giga- factories, motors, power electronics, assembly plants but it is not clear how Government tax revenues from petrol sales will be recovered by other means.

Whilst the product development is moving in the right direction how a net zero product supply chain will be achieved by 2050 is still unclear.

EVs

In the last year a large global telecommunications player bought a company that installs charging points in residential areas where people don’t have a driveway (40% of the UK park on streets). Consumers are very unlikely to buy an EV if they don’t have line of sight from their front door of a charging point. So, more charging points will help their customers find moving to an EV more attractive.

There’s a broad spectrum of opportunities that come with the challenges and the tide has turned from a customer behaviour point of view and the journey over the last 10 years from the first EV. OEMs almost had to give the cars away, now it’s the other way around as there’s a pull from the marketplace. There are now more challenges in how to support the different models of behaviour, be it at home charging, on street charging, fleet charging from a depot etc. It’s a mosaic of charging solutions that’s out there with lots of different players and no one silver bullet that does it all. There’s a lot of things that need to come together to make sure it’s a really resilient infrastructure.

Rail

The demand for clean air and decarbonisation coming out of Covid has also impacted on Rail. Rail has always measured itself on emissions per person per km but when there are fewer passengers and shorter journeys the metrics don’t look very good. And if you start to measure emissions per square mile or per hour the railways, particularly in the north, don’t look good. If road vehicles and light rail are going electric, then the railway could get left behind.

Aviation

Moving forward to a net carbon zero by 2050 is front of mind for most airports and is on every board agenda. There are two elements to this; what can we control and what can we influence. Direct carbon emissions are committed to being carbon neutral by 2025 and then there’s the broader issue relating to flights. An aircraft’s biggest challenge is around technology and the ability to sustain flight for longer with electric, sustainable aviation fuels or hydrogen. To achieve this will take 10-15 years. In the interim period there will be various ways to bridge that divide with sustainable aviation fuels but that will only be 10-20% and otherwise it’s carbon offsetting, which some airlines have already done. People have different perceptions on carbon offsetting but if it is relevant to part of the journey, then there is generally public support.

Hydrogen

There are several transitions happening in Hydrogen to different speeds with differing impact. The transition of UK bus fleets from fossil fuel to zero emissions adds a direct benefit at a local community level by improving air quality as well as reducing global CO2. If we look to replicate the personal mobility landscape, many households own multiple cars and just replacing these with cleaner fuel (electric or hydrogen cars) is limited in impact. Perhaps the true solution is a society where nobody owns a car, instead with an efficient, accessible, high- quality public transport network that has zero emissions. To achieve this requires significant disruption and a total mindset change.

Government intervention

Customers will be demanding that energy sources are low carbon, and businesses are signing up to e-fleets and decarbonising their activity. Will Government support this further or will some incentives be reduced. It was argued that a spirit of innovation and though agility is still required and not become blinkered into what the final solution is. Businesses need to continue to lobby for economic solutions and hope the Government will remain supportive and set realistic road maps for different sectors.

Human behavioural shift

People have started to move to electric cars but to make the significant sustainable changes public transport has to play a much bigger role. The biggest shift is in the move of people from single car trips to sustainable transport networks thus reducing the 190,000 tonnes of carbon which cars currently emit. Government needs to help on behavioural messaging. Making single car trips to city centres more difficult and highlighting the cost of car versus public transport journeys are key actions.

If we want to get multimodal, then government needs to put more money into understanding what all this means for all, consumer and providers alike.

Wholesale swapping of cars for public transport

There’s an issue around collective responsibility and personal commitment to this. We all understand the science and logic that if we carry on as before there will be no planet left but when it affects personal situations it’s more contentious. Looking at the government bus strategy, there is commitment to making it more reliable, transparent and available to everybody at an affordable price.

Unsurprisingly bus companies are keen for more investment and not how do we get a charging point on everyone’s driveway. What politician can currently expect to get elected by saying “everyone out of the car and onto the bus”?

Housing

This week the government has set a target to replace 600,000 domestic boilers with heat pumps every year to 2028 to help ‘decarbonise’ the home but grant schemes are being scrapped so consumers will need to meet the costs.

Energy has moved away from coal supply to renewables with a focus on putting energy efficiency measures in consumers’ homes. There is a financial gap for these new technologies before they become available to the mass market. There is progress around new build housing, moving from gas boilers to heat pumps and solar. But the retrofit price point makes it unavailable for most customers. The government previously pledged c. £3bn in the Green Homes Grants, which subsidised energy improvements in low-income homes. Very little of that got spent. Whilst there is a desire from society to make progress in housing there is a need for government support, incentivisation and funding.

Consumer price thresholds for low carbon

In automotive, the first 5-10% of early adopters are prepared to pay more. The interested will pay some small premium, but the rest of the population requires more persuading. From a bus and coach perspective passengers want environmentally friendly transport, and price sensitivity is acute.

There are disparities depending on where people live. Bus services are less suited to rural areas so urban and semi-urban systems is where uptake will be quickest. Young people pay for convenience and choose Uber over public transport because they can call it, get it now and book on an app, they can fare share, it’s accessible and technology is crucial to being able to make that happen.

In power generation there are a small number of people who are prepared to pay for true green energy. The vast majority want the cheapest product regardless of sustainability or where it is sourced. In Switzerland there was an obligatory switch to a green tariff for all consumers and after a trial period when consumers could switch back only 20% did so to a cheaper tariff.

Conclusions

It is clear there are many differing market drivers, political agendas, technologies and public priorities which will determine our decarbonisation journey.

Without investment none of this will happen. Investment criteria is changing. Unless ESG credentials are now clearly demonstrated, funding won’t be released. It’s now less about green washing and more about metrics and sense of purpose. Aligned with this, Government needs to be clear on guidelines and regulations to attract the investor community to make decarbonisation a reality.

Acknowledgements

Hoggett Bowers are very grateful to all our guests and a special thank you to:

Carl Bayliss, VP Mobility, Centrica/British Gas

Malcolm Brown, CEO, Angel Trains

Dyan Crowther, CEO, HS1

Ian Constance, CEO, APC

Robin Gisby, CEO, DfT OLR Holdings

Dave Lees, CEO, Bristol Airport

Chris Lovatt, COO – Energy Infrastructure Services, EON UK

Geeta Nanda, CEO, Metropolitan Thames Valley HA

Jason Simpson, VP Global Energy & Utilities, Liberty Global

Tom Stable, CEO, National Express UK & Germany

David Thomas, CEO, Barratt Developments

Frank Thorpe, CEO, BYD