The IEA peer review of the United Kingdom (UK) took place over 20-24 November 2023. The review came at a timely moment, as the United Kingdom is in the process of reviewing its energy transition strategy to align with industrial and energy security goals.

The United Kingdom was one of the first major economies to legally establish a net zero target in 2019. It was also an early mover in setting legally binding carbon budgets and carbon pricing as well as creating an independent body, the Climate Change Committee, with statutory authority to track the government’s progress toward its climate targets.

The United Kingdom met its first three carbon budgets (2008-12, 2013-17 and 2018-22). Greenhouse gas (GHG) emissions in 2023 are estimated to be 53% lower than in 1990. Most GHG emissions reductions came from a decline in coal use and an increase in renewable electricity generation.

The United Kingdom has committed to lowering emissions by 68% from 1990 levels by 2030 as part of strengthening its Nationally Determined Contribution to the United Nations Framework Convention on Climate Change. It will, therefore, need to not only maintain but to accelerate action to reach the target. Continuing to meet carbon budgets will become harder, as the abatement challenge increases, requiring more policy action to support investment across more sectors.

The government has a long list of targets and policies to support energy-related climate change strategies. Since the IEA’s last review, the UK government has set out the wider context of its strategic priorities for the energy sector in several papers, including: the Energy White Paper (2020), the Ten Point Plan for a Green Industrial Revolution (2020), the Net Zero Strategy (2021), the British Energy Security Strategy (2022), Powering Up Britain (2023), Powering Up Britain: Energy Security Plan (2023), and Powering Up Britain: The Net Zero Growth Plan (2023). Such long-term planning is helpful to provide investment signals and determine the expectations of various parts of the energy system. Equally important is ensuring a stable and predictable policy environment. Looking ahead, the shift from strategy setting to implementation will need to happen quickly, as investments toward 2030 and 2050 targets are needed right away. 

The UK electricity sector has undergone major changes in recent years, with a sizeable reduction in coal power generation and rapid deployment of renewable energy sources. The government has ambitions to fully decarbonise the power sector by 2035 (subject to security of supply), deploy up to 50 gigawatts (GW) of offshore wind by 2030, increase solar capacity by 70 GW by 2035 and realise up to 24 GW of nuclear power by 2050.

Historically, coal power was the main source of electricity generation in the United Kingdom, but since the IEA’s last review (2019), most of the United Kingdom’s coal-fired power plants have closed in line with plans to phase out coal-fired generation by October 2024.

In addition, nuclear’s share in electricity generation has also been declining to around 15% of generation. However, the UK government has committed to ensuring that nuclear continues to play an important role in the energy mix and is taking steps to revitalise its nuclear industry.

The reduction of electricity generation from coal and nuclear has been compensated by increased electricity generation from natural gas and large-scale deployment of renewables. Renewables have risen to reach 42% of the electricity mix in 2022, with renewable generation growing more than threefold since 2012, led by wind.

In the coming years, the United Kingdom will need to ensure the continued buildout of low-emissions generation to displace unabated gas, replace nuclear closures and keep up with load growth driven by electrification. Moreover, the energy transition will necessitate an unprecedented buildout of grid infrastructure.

The government’s Contracts for Difference scheme has been a notable success story in driving the renewables boom. The government is also working to remove barriers to renewables development and reduce the time it takes to get planning consents for renewables projects. A massive buildout of grid infrastructure and rapid growth in grid connections will be critical priority areas to support the energy transition. 

The UK buildings sector, with a stock that is among the oldest in Europe, accounts for over a quarter of the United Kingdom’s energy emissions. The IEA urges the government to keep a sustained focus on energy efficiency upgrades of the existing building stock and a rapid turnover of fossil fuel heating systems toward electricity as priority areas that can show fast results.

Toward this end, the United Kingdom has already laid out strategies and put in place policies, underpinned by financial support, to decarbonise the buildings sector, including phasing out fossil fuel boilers. Still, ambitious targets will need significantly more policy focus to be achieved, and the government should avoid frequently changing timelines and targets and strive for maximum ambition.

A major impediment to the electrification of buildings is the cost of electricity relative to fossil fuel alternatives, which poses challenges for affordable fuel switching. Efforts to rebalance costs between electricity and natural gas are, therefore, strongly encouraged. 

Transport is the United Kingdom’s largest emitting sector, responsible for over one-third of domestic energy-related emissions. Its accelerated decarbonisation is central to delivering overall climate commitments. Toward this end, the United Kingdom has laid out roadmaps and strategy documents to clarify its approach, which involve plans across modes of transport.

The government has implemented strong policies to increase uptake of zero emissions vehicles (ZEVs) to facilitate decarbonisation of the light vehicle fleet. For example, regulations to deliver the world-leading ZEV mandate entered into force in January 2024. Complementary efforts to use other tools – including fuel efficiency targets, biofuels mandates, and the promotion of public and active transport – will help support more rapid decarbonisation of road transport.

The industry sector is an important part of the UK economy, accounting for around a fifth of UK energy consumption and 14% of emissions. Government efforts on industrial decarbonisation should be oriented toward the near-term goal of optimising energy efficiency gains, combined with sustained efforts to enable investment in deep decarbonisation.

Electrification can be supported by efforts to redistribute costs from electricity to natural gas as well as reforms to improve grid connections.

Commercialisation and adoption of new technologies, including carbon capture, utilisation and storage (CCUS) and hydrogen, will also be critical to industrial decarbonisation. The United Kingdom’s cluster approach to CCUS, which leverages regional industrial advantages and ensures broad geographic coverage, is a good one in principle. In the future, low-carbon hydrogen is expected to play a more prominent role in the industry sector, and industry will be a key driver of hydrogen development in the United Kingdom.

The United Kingdom is also an historically important oil and gas producer, which has underpinned domestic energy security and supported strong economic activity and quality jobs. Offshore oil and gas production in the United Kingdom is on a long-term declining trend despite additional production from new fields and incremental projects in existing fields. As in all oil- and gas-producing countries, the United Kingdom will need to assess the longer term role of upstream production in a net zero future.

Given the economic significance of the United Kingdom’s oil and gas industry in the overall economy, the government will also need to be mindful of economic challenges to revenues and jobs that the energy transition might bring. In this regard, the clean energy economy can offer considerable opportunities for creating new jobs and industries.