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Tunley Environmental3 Nov 20234 min read

The Future of Energy Transition Policies in North America and the UK

The energy transition is a global imperative as countries strive to reduce their reliance on fossil fuels and move towards sustainable and renewable energy sources. In North America and the United Kingdom (UK), significant policy changes and investments are driving the transition and shaping the energy landscape for the future. This article explores the key developments, impacts, and future prospects of the energy transition in these regions.

The Energy Transition Outlook in North America

Policies Driving Investment in Renewable Technologies

In North America, policies play a crucial role in triggering investments in renewable technologies. The Energy Transition Outlook North America report by DNV highlights that policies implemented in the United States and Canada are accelerating the energy transition by creating stability and attracting private investment. The Inflation Reduction Act (IRA) in the United States, in particular, has provided much-needed stability for the renewables industry, reducing boom-and-bust cycles linked to changing regulatory and fiscal landscapes.

Decline in Fossil Fuel Demand and Rise of Renewables

The report predicts a significant decline in domestic fossil fuel demand in North America, mainly in the transport and power sectors. By 2050, domestic fossil fuel demand is expected to decrease by 60%. However, despite this decline, export of fossil fuels remains stable. The energy transition is driven by electrification, with renewables becoming the dominant source of electricity generation. Solar power is projected to become the largest producer of electricity in North America by the mid-2030s, accounting for almost half of the region's electricity generation by 2050.

Impacts on Household Energy Expenditure and Affordability

The energy transition in North America is set to have a positive impact on household energy expenditure. As renewable energy becomes more prevalent and efficient, household energy bills are expected to halve by 2050. This reduction is driven by the affordability of electricity generated from renewables. The report also emphasises the importance of grid expansion to support the influx of renewable energy resources and ensure energy affordability for households.

The Energy Act 2023: Transforming the UK's Energy System

Strengthening Energy Security and Supporting Net Zero

The Energy Act 2023, recently passed in the UK, is the largest piece of energy legislation in the country's history. It aims to transform the UK's energy system by strengthening energy security, supporting the delivery of net zero carbon emissions, and ensuring long-term affordability of household bills. The Act lays the foundation for an energy system fit for the future by promoting efficiency, competition, and the adoption of clean energy technologies.

Unlocking Private Investment and Creating Jobs

One of the key objectives of the Energy Act is to unlock £100 billion of private investment in energy infrastructure. This significant investment will not only support the deployment of renewable energy projects but also create thousands of skilled jobs across the UK. The Act provides long-term certainty for the energy sector, making it more internationally competitive and attractive to private investors.

Promoting Energy Efficiency and Affordability

The Energy Act includes measures to promote energy efficiency and affordability. It introduces a new tender process for onshore electricity networks, increasing competition and reducing costs for network operation and development. This new model is expected to save consumers up to £1 billion off their energy bills by 2050. Additionally, a specific merger regime for energy networks will be created to protect consumers and save households up to £420 million over the next decade.

Transitioning to Smart Energy Systems

The Act recognises the importance of smart energy systems in reducing costs and managing energy consumption effectively. It prioritises safety and consumer confidence in transitioning to smart appliances and managing energy consumption. A smart electricity system has the potential to reduce system costs by up to £10 billion a year by 2050. The Act also expands the regulator Ofgem's remit to heat networks, improving pricing rules and service quality for heat network consumers.

Supporting Low-Carbon Technologies and Carbon Capture

The Energy Act supports the development and adoption of low-carbon technologies. It incentivises the heating industry to invest in low-carbon heat pumps and facilitates the smart meter rollout, which could generate total bill savings of £5.6 billion for households. The Act also establishes a licensing framework for carbon capture and storage (CCS), supporting the UK's first carbon capture sites and creating up to 50,000 jobs by 2030. Additionally, the Act makes the UK the first country to legislate for fusion regulation, encouraging investment in fusion power plants.

The Bottom Line

The energy transition in North America and the UK is driven by a combination of policies, investments, and technological advancements. In North America, policies are accelerating the transition, leading to a significant decline in fossil fuel demand and the rise of renewables. The Energy Act 2023 in the UK is transforming the energy system, strengthening energy security, promoting affordability, and supporting the country's net zero commitments. These developments are not only shaping the energy landscape but also creating significant opportunities for private investment, job creation, and the adoption of low-carbon technologies. As the world strives to achieve net zero carbon emissions, the energy transition in these regions serves as an example of proactive and sustainable measures to address the global challenge of climate change.


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