“It’s all about the heat” – and other revealing insights from an example in net-zero planning

Faizan Ahmad Integrated Solutions Manager Energy Solutions EDF Energy

While it may seem like another era, it was just last year in June that the UK became the first major economy to legally commit to ending its contribution to climate change by 2050. Since then, even though Covid-19 may have briefly disrupted the positive momentum, many organisations have made their own public commitments to achieve net-zero targets in even shorter timeframes.

Most organisations are in the earliest stages of the Plan-Do-Check-Act cycle for net-zero. Based on work with customers to date, this article provides a high-level worked example for the benefit of those engaged in net-zero planning, as well as a review of key insights gained from the outcome.

The first step: baselining

Let’s consider a small commercial organisation, “ABC Logistics”, where the primary sources of emissions are from the operation of its fleet and facility with the following breakdown:

  • £25K of diesel spend for 150K business miles per year
  • £300K for 2500 MWh/year of electricity (plug loads, equipment, lights, space conditioning)
  • £100K for 2500 MWh/year of natural gas (domestic hot water and space conditioning)

At first, considering a 30-year timeframe for baselining may seem challenging. But over such long timeframes, we can ignore complexities such as accounting for annual impacts of weather and operational changes, and just focus on the basics.

For baselining, we need to apply the relevant carbon emission factors till 2050. Obtaining the relevant figures for gas and diesel is straightforward. But in the absence of on-site renewables, electricity emissions are dependent on the grid carbon intensity which is more uncertain.

For our purposes, we’ll use the average of conservative and aggressive grid carbon intensity models from National Grid’s Future Energy Scenarios 2020 publication (the Steady Progression and Consumer Transformation scenarios respectively).

With these minimal inputs and a modest 2% cost inflation assumption, we can generate the following insightful baseline emissions chart for ABC Logistics:

The graph above draws a question about the reasons for the diminishing electricity emissions in the latter years. At present, the grid is already decarbonising rapidly due to the closure of coal power stations and the growth of renewables. But further to this, optimistic National Grid models suggest that emissions may be driven down even below zero due to the potential growth of carbon capture and storage (CCS) technologies.

While our example illustrates the broad conceptual thinking required for net-zero baselining, for simplicity, we’ve only focused on Scope 1 and Scope 2 emissions which are directly under an organisation’s control, as opposed to downstream Scope 3 emissions. In addition, for the industrial sector in particular, it’s likely that Scope 1 emissions may include more than just natural gas and diesel, and these would need to be accounted for appropriately.

The next step: reduce emissions!

After developing a baseline, the next step is evaluating the impact of various emissions reduction options over the period. While the usual suspects of energy efficiency and renewables will still be key components of any net-zero plan, the baseline shows that decarbonising heat and transport are clearly major focus areas as well.

Continuing with the example, let’s assume ABC Logistics puts together essential elements of a carbon management system: a formal policy supported at the C-level, a dedicated team, metering systems, and a budget comprising of external finance, grant funding as well as internal capex.

After evaluating the baseline and any other constraints, the following is deemed within the art of the possible:

  • A multi-site energy efficiency program covering all O&M, behavioural and capital measures, resulting in 30% savings across electricity and gas by 2021
  • A combination of rooftop solar and renewable corporate PPAs to cover 10% of electricity use by 2022
  • Converting from gas boilers to heat pumps by 2023 where possible, and as a result offsetting 75% of natural gas use
  • Converting 90% of the existing diesel fleet to EVs by 2024

For electricity consumed from the grid, an organisation could also minimise its reported emissions through the purchase of certificates. We haven’t considered this measure here given the absence of ‘additionality’, i.e., a traceable cause and effect pattern in reducing on-ground emissions.

For simplicity, let’s assume the carbon measures take effect entirely in the years noted in the programme above. This would result in the following much-improved carbon profile:

We didn’t quite achieve net-zero organically in this example, mainly due to residual natural gas emissions. But this is where carbon offsets may be helpful, or alternatively, where renewable-powered district heating networks and hydrogen may play a role in displacing natural gas for residual loads which cannot be directly electrified.

Though not explicitly included above, any comprehensive net-zero plan would also consider storage and demand-side-response opportunities. Though the measurable carbon impacts may be smaller, these initiatives are critical in supporting the grid of the future and can unlock sources of revenue for use in other carbon reduction projects.

Four key insights

While every organisation will have unique carbon profiles and constraints, there are recurring general themes and interesting conclusions which can be extracted from this example scenario and are worth highlighting:

It’s all about the heat –  The saying ‘a picture is worth a thousand words’ is definitely true when considering heat decarbonisation. It’s one thing to read reports and hear the general industry buzz about the importance of heat decarbonisation, and it’s another thing to see a 20-year profile graph and get a first-hand visual sense of the relative impact of gas vs. electricity emissions. This really helps to highlight the scale and importance of the challenge as well as prioritise opportunities.

A decarbonised grid makes the transport decarbonisation opportunity more urgent –   Looking at the baseline chart in the 2030s, a modest £25K diesel spend will result in comparable emissions to a £300K electricity spend! If the grid decarbonises faster, the comparison will be true even sooner. This may be another argument to speed up the EV transition and bring forward the 2035 ban on petrol and diesel vehicles.

Efficiency is still the bedrock for net-zero – What role does energy efficiency play in a world where the grid carbon intensity may go negative, resulting in a situation where using more electricity may reduce emissions? The unfortunately-not-so-obvious answer is that efficiency remains critically important.

Optimistic future grid intensity forecasts are not developed in a vacuum and are very dependent on the magnitude of loads served by the generation on the grid. Reviewing the details of the National Grid FES 2020 publication, all aggressive grid carbon intensity scenarios are coupled with an assumption of at least a 20% across-the-board improvement in business energy efficiency by 2030, and even more aggressive efficiency improvements across the rest of the economy.

Beyond this, energy efficiency is typically the most cost-effective carbon reduction measure which can subsidise other less economic projects. It is also critical in releasing much-needed grid capacity for heat and transport electrification. Also, mass adoption of heat pumps will not be feasible without a parallel initiative to improve the energy efficiency of building stock in the UK.

Net-zero is a collective effort –   In the midst of various companies, councils and organisations making independent net-zero declarations and commitments, it is sometimes easy to forget the collective nature of the task at hand: Grid decarbonisation will be dependent on an all-hands-on-deck approach to energy efficiency. Decarbonising residual natural gas consumption and long-haul transport will be dependent on the government facilitating investment in hydrogen and its associated infrastructure as a potential solution. Businesses deploying private wires or PPAs for renewable energy will still need a utility intermediary to top up the difference when the sun isn’t shining, or the wind isn’t blowing.

And finally, when further considering the carbon impacts from cross-country sectors such as shipping and aviation, it’s clear that achieving global climate goals will truly require an international collective effort.

Much credit to my colleague Aimee Williams who drove the development of the net-zero modelling tools used in this article. Also, for the more technically-minded, the following additional assumptions were used for modelling – Heat pump COP: 4, Baseline boiler efficiency: 80%, Diesel fuel economy: 0.13 l/mile, EV fuel economy: 0.2 kWh/mile