Energy, water and waste: What does the National Infrastructure Assessment recommend for the UK’s green economy?

UK Government has been urged to ensure adequate grid capacity to minimise connection delays.

The Commission only produces a National Infrastructure Assessment (NIA) every five years. This means that the latest edition, which launched at midnight on Wednesday 18 October, is the first since the UK Government legislated for net-zero by 2050 back in 2019.

Overall infrastructure investment totalled some £55bn over the past decade, and this will need to rise to £70-80bn per year in the 2030s to deliver the Commission’s recommendations in full. There will then be a slight decrease in cost to £60-70bn per year in the 2040s.

Private investment will need to do most of the heavy lifting from now through to mid-century; public spending should be around £30bn each year in the 2030s and 2040s by the Comission’s calculations.

The Comission has identified three major investment areas within its headline figures.

Water infrastructure

The Assessment recommends £12bn of annual investment in water infrastructure from 2025 to 2030, decreasing to £8bn a year between 2031 and 2050.

It states that the UK must prepare for a “drier future” by building out water supply infrastructure. Water waste will also need to be reduced both by addressing leaks from existing infrastructure and getting business and households to cut back on water use. The Commission says “a lot more still needs to be done”.

Without action, the Commission is warning, water demand will exceed water supply by at least four billion litres each day. This will be due to a combination of increased demand from population growth and decreased supply resulting from climate change.

The document recommends that, by 2025, the Government should publish resilience standards for the water sector and set out the costs of ensuring adherence to the standards. It should;d also ensure that water infrastructure operators are mandated to publish climate adaptation reports which are, at present, voluntary.

On supply infrastructure, the Commission criticises the failure of consecutive governments to deliver a new major reservoir in England over the past 30 years. New reservoirs could deliver at least 1.3 billion litres of water each day in England by 2050.

On demand reduction, the Assessment floats a rollout of smart water meters similar to that seen with electricity meters. It states that some 1.4 billion litres of water a day could be saved if smart meters are coupled with public awareness-raising.

Halving leakage across the water network would conserve a further 1.4 billion litres and should be a 2050 target for the Government. Water leakage actually increased year-on-year this past 12 months.

The report also calls the number of serious pollution incidents caused by water company assets “unacceptably high” and recommends further Government intervention to bring water bodies back to good ecological status.

Waste and resource management

The Assessment notes that the UK is not on track to achieve its 2035 target for 65% of all household waste to be recycled. Recycling rates have stagnated for a decade while total waste generation in England has increased.

Several interventions are recommended that could change the course of travel. Chief among them is implementing packaging reforms, first promised under the Resources and Waste Strategy 2018, “without delay”.

Aspects of the Strategy have been plagued by delays and cancellations. A reformed Extended Producer Responsibility (EPR) scheme for plastic packaging producers is now more than a year behind schedule, as is a UK-wide Deposit Return Scheme (DRS) for drinks packaging. Parts of the industry advocated vocally for a delay due to Covid-19 and the cost-of-living crisis.

The Resources and Waste Strategy also included pledges for regular food waste collections from all homes, along with a unified and simplified set of dry material recycling rules for all councils. Additionally detailed were better battery design and recycling standards. The former has been shelved but the current Government has stated its commitment to the latter.

The Assessment also recommends a rethink of investment incentives for the recycling industry and for carbon capture from the energy-from-waste (EfW) sector. The report makes the case for an end to unabated EfW processing by 2035, in line with pledges to scale carbon capture in power generation. It states that the creation of new, unabated EfW capacity would be “unnecessary and harmful”.

Energy generation

The Assessment states that Britain’s future power generation network will consist of “renewable generation schemes rather than large, central power stations”. Indeed, the current Government has targets for the UK to host 70GW of solar by 2035 and 50GW of offshore wind by 2030. It has also pledged to end unabated gas-fired power generation by 2035.

By the NIC’s estimates, the UK can meet the vast majority of its electricity demand with renewables by the mid-2030s.  This will depend on increased investment, which will hinge partly on the modernisation of the Contracts for Difference (CfD) auction scheme.

The UK will need to invest between £20bn and £35bn into the energy transition annually between 2025 and 2050. This covers not only generation but also storage, transmission and flexibility.

However, this will be less than the amount required for a fossil-based system, which the Assessment describes as having “high operating costs”. It states: “The cheaper operating costs of a lower-carbon energy system more than offset the high upfront costs of building it”.

It adds: “An energy system dominated by electricity produced from renewable generation is capital intensive with long-lasting assets and few fuel inputs. This makes it inherently less price volatile, and therefore less susceptible to future price shocks.”

Energy storage, flexibility and transportation

“Supply from a blend of renewable and nuclear generation will not always be sufficient to meet demand,” the report states. “The need for flexibility is not new, but the variability of renewable generation will mean that more flexibility is needed.”

The Assessment says that short-term flexible energy capacity will need to quadruple on current levels by 2035 (from 15GW to 60GW) as the UK works to remove unabated gas-fired electricity generation from the grid, and as electricity demand increases.

The NIC additionally sees a need for 30TWh of long-term flexibility to be provided by hydrogen power stations, or gas power stations with CCS, by 2035. This would be to replace and upscale the existing gas peaker plant capacity and is described in the document as a strategic national energy reserve.

A new hydrogen storage and transport network will need to be “up and running well before 2035” to serve not only power stations but also industrial users.

Also covered in the report is the need to build out and modernise the electricity grid to cope with additional demand from population growth, urbanisation and electric heat and transport. It is timely that, this week, the International Energy Agency said a doubling of global annual grid investment, to $600+bn, is needed by 2030. This would enable the addition or replacement of 80 million km of power lines by 2040.

Heating

The report states that around 88% of English buildings currently use gas boilers. It urges the Government to come forward with a plan to switch eight million additional buildings to low-carbon heating by 2035 – mainly heat pumps but also some heat networks.

One of the NIC’s most controversial recommendations is that the Government should not support hydrogen for building heating.

The Government has said it will take a strategic decision on the role of hydrogen in home heating in 2026, following a series of real-world trials increasing in size. Gas companies are, of course, keen on hydrogen blending and then 100% hydrogen as a fully electrified system would put them out of business.

The NIC comes down staunchly against hydrogen for home heating on efficiency and cost grounds, and recommends that the Government backs electric heating as “the only viable option for decarbonising buildings at scale”.

It is recommended that the Government fully subsidises heat pump installation costs for one-third of homes, based on income. All others should benefit from a £7,000 grant to switch to a heat pump or heat network.

Subsidising the heat transition in this way would cost around £3.2bn per year through to 2035. The Government could then start to scale back support as heat pumps and heat networks become more affordable, benefitting from economies of scale and technology advancements.

This, combined with the other energy transition measures in the Assessment, would result in an annual energy bill savings for each average British home exceeding £1,000.

Road transport

Transport has been the UK’s highest-emitting sector since 2016 when it overtook power generation as coal continued to come offline. It accounted for 26% of all fossil fuel demand in the UK in 2022.

The NIC wants to see the Government establishing an updated monitoring and review regime for transport decarbonisation by 2025.

Road transport accounts for 98% of surface transport emissions and the NIC states that the adoption of electric vehicles (EVs) “will be key” to decarbonisation.

The report hails the Government’s promise to ensure that there are at least 300,000 public EV chargers in the UK by the end of the decade, up from around 45,500 at present. It states that the delivery of this ambition is not guaranteed; it would require a 30% increase in the nation’s charging point stock each year. This will become more challenging as time goes on, the report states.

Moreover, it calls on the Government to place a greater focus on ensuring that charging points are more distributed. At present, they are mainly concentrated in urban areas and on motorways in London and the South-East. The NIC wants to see all local authorities “sufficiently equipped and supported” to deliver an appropriate level of chargers for their populations.