COP 27: The move to electrification
Changing our heating and transport systems to meet our net zero target
In our last article we highlighted the net zero challenge facing the UK. As it stands, the UK has a legally binding net zero target by 2050, and interim aims, set in April 2021, to reduce emissions by 78% by 2035 (compared to 1990 levels). In meeting this interim target, set in its sixth Carbon Budget last year, the UK would be three quarters of the way to achieving net zero. However, to meet these targets requires significant infrastructure change. The UK’s highest emitting sector is surface transport. In 2019 it was responsible for 119 MTCO2e greenhouse gas (GHG) emissions1, accounting for 22% of the total. Cars are responsible for 61% of this figure, followed by HGVs (17%), vans (17%) and buses (3%). Rail represents just 2%.
Surface transport is the largest emitting sector representing 22% of the UK’s total greenhouse gas emissions. And the direct emissions from our buildings, primarily from burning natural gas for space heating, represents 17% of the UK’s GHG emissions2. So, it is clear why evolving our transport and our building heating approaches are key components to successfully decarbonising the UK’s economy.
Heating our homes and businesses
Our buildings are responsible for a large proportion of our emissions. In addition to the 87 million tonnes of direct GHG emissions2 (primarily burning gas for heat), our buildings also consume 59% of our generated electricity – used for lighting, cooling and to power appliances. And our homes represent the majority of this energy use in buildings, representing 77% of building direct emissions.
Our first priority will be to improve the efficiency of our buildings. We have some of the poorest performing homes in Europe – a typical home in the UK will lose heat three times quicker than homes in other European countries3. A major programme of retrofitting energy efficiency measures to our buildings would go a long way to reducing the energy costs, demand and emissions. And a more efficient building envelope provides a wider range of solutions to retrofitting it with low carbon heating options.
The best solution we have of low carbon heating for our homes is to switch from burning fossil fuels (such as gas, oil) and use low carbon electricity to power a heat pump. A heat pump does not create heat itself, it moves heat – typically from the air or ground outside to inside a building. And a heat pump can move more energy than is used in operating it making it an efficient technology for heating.
Former Prime Minister Boris Johnson’s government set out an ambition to support the growth of the heat pump market to around 600,000 installations per year by 2028 offering clear opportunities for businesses throughout the supply chain to innovate and support consumers in the transition to low carbon heating. The market has a lot of growth to come in the next few years – in 2021 only 1.5 heat pumps were installed per 1,000 households in the UK - compared to 50 heat pumps per 1,000 households in Norway.
Greening our transport systems
We all know by now that we should be considering the carbon impact of our travel. Whether we’re being encouraged to take the train rather than fly, carpool for the work commute or walk and cycle more, the message has been clear. However, while these small individual lifestyle changes can be helpful in shifting the dial, much wider change is needed for the UK to meet its net zero ambitions.
The UK government set out a path to green our roads. A ban on the sale of new petrol and diesel cars, originally set for 2040, was brought forward to 2030. In addition, by 2035, all new cars and vans will have to have zero emissions at the tail pipe. According to the Society of Motor Manufacturers and Traders (SMMT) around 15% of new vehicles sold this year run only on batteries, and the sale of plug-in electric cars continues to rise, with October 2022 seeing 23.4% year-on-year growth.
A key concern for consumers and businesses considering the move to an electric vehicle (EV) is the availability and reliability of charging points across the UK. According to the Department for Transport, as at November 2022, there are 35,778 public charging devices available. However, there remains a disparity when it comes to where these points are located. London, for example, has 31.5% of UK charging points whereas the North East has just 3% and Wales 4%. For more businesses and consumers to consider going electric, more charging points are needed across the UK in order to give peace of mind to drivers. Positively, there has been growth in the availability of rapid (25-99kW) and ultra-rapid (100kW+) chargers becoming available across the road network. And with more vehicles on the market able to charge at 150+kW rates, charging stops are now becoming short enough to just allow a toilet break or to grab a coffee.
Whether you’re a business or a consumer, switching to electric does require an upfront investment. However, there are a growing number of products available to make this easier. Our wholesale finance business has been working with Octopus Electric Vehicles (EV) for the last three years to support them in taking their electric salary sacrifice product to market. The scheme, once signed up to by a business, allows employees access to a number of personal and tax benefits when they pay for their electric vehicle from their gross salary. Close Brothers was the first funder to support Octopus EV with their own book offering, and since taking it to market it has grown exponentially to become one of the fastest growing leasing companies in the UK.
Building on this success, we have continued to work with Octopus EV to support them bringing new innovative products to the market. In July 2022, we were pleased to be named as sole funder for the launch phase of its exciting new consumer offering: “the ultimate EV package”. This offers consumers a complete EV solution, combining a new electric car with Octopus flexible EV domestic energy tariffs and a smart home charger, installed for free. This combination allows the customer to take advantage of cheaper and greener ‘time of use’ energy tariffs to charge their car.
1Climate Change Committee report ‘Sixth Carbon Budget – The UK’s Path to Net Zero – Surface Transport’ – Dec 2020
2Climate Change Committee report ‘Sixth Carbon Budget – The UK’s Path to Net Zero – Buildings’ – Dec 2020
3Tado (heating controls company) user study - https://www.tado.com/gb-en/press/uk-homes-losing-heat-up-to-three-times-faster-than-european-neighbours