1、1CONTENTSENERGY DEMANDPOLICYDNV Energy Transition Outlook UK 2024ENERGY SUPPLYENERGY EXPENDITUREEMISSIONSFinal turbine installed at Viking Wind Farm.Image:SSE Renewables.CCS&HYDROGENELECTRICITY&GAS A national forecast to 2050ENERGY TRANSITION OUTLOOK UK 2024FOREWORDAt COP 28,countries agreed on the

2、need to“transition away from fossil fuels in energy systems”for the first time,providing hope that meaningful action would decisively mobilize the world into action.Unfortunately,the deal doesnt compel countries to act,and no timescales are specified.The UKs early ambition and action to champion the

3、 energy transition has allowed the nation to make good progress.That progress now seems to be stalling,and,as we detail in this UK Energy Transition Outlook(UK ETO),the country will not meet its net zero by 2050 target unless the government increases policy support to a low-carbon future.This foreca

4、st,now in its second edition,is based on our independent model and accounts for the UK energy systems physical,political,technological,and economic links to Europe and the rest of the world.Over the next three decades,the UK will undergo a strong shift from fossil fuels to electricity as an energy c

5、arrier.But the scale of the shift is now lower than we forecast in our first UK ETO report,issued in 2022.As a result,oil and gas will still account for 35%of the UKs primary energy supply mix in 2050.Moreover,the outlook for hydrogen now seems a lot less certain in the absence of a clear,UK-wide st

6、rategy on the demand and supply of this crucial decarbonization fuel.One bright spot this year is that the future of UK CCS looks more robust due to heightened government support and an expected increasing carbon price.London Underground(the tube)launched its Mind the Gap safety campaign more than 5

7、0 years ago,and that call to action has become second nature for my fellow Londoners.I think we need to elevate the message to Mind the Gap to Net zero.The gap in question is between the Nationally Determined Contributions(NDCs)of many nations,including the UK,and the 2050 net-zero ambitions they ar

8、e pursuing through their current emission-reduction plans.There is a gap in the number of gigawatts needed and the number of renewable projects being built.There is a gap between what supply chains can deliver and what nations need.There is an ever-increasing skills gap.But fundamentally,there is a

9、gap between targets and the policy needed to drive industry to scale.To bridge the gap we need to keep focused on the positives:the UK has the largest offshore wind market in the world established through a combination of North Sea oil and gas expertise coupled with strong government policy support.

10、The nation is seeing a greater number of solar projects constructed,industrial scale energy storage plants and year-on-year sales growth of EVs.We also need to focus on the key challenges.The national power grid needs significant scaling to make it more responsive to better manage supply and demand,

11、and pipeline infrastructure needs to be tested and upgraded to ensure the safe transmission of blended hydrogen to communities and businesses around the UK.Home insulation is a key enabler of decarbonization and must be policy priority.Like all balanced systems,if you want less of something you must

12、 start with more of something else.Green electricity is key to the energy transition,the competitiveness of the UKs future economy,and the wellbeing of our households.With oil and gas representing 80%of todays energy system,a dramatic ramp up of renewable power and grid capacity is needed.Without th

13、is,change will not be realized.Alignment between authorities,energy companies and society is needed to bridge the gap and to achieve legally-binding net zero commitments.We will move forward,faster,together.2023 saw extreme weather events devastate communities around the world,with new records set f

14、or global temperatures and carbon emissions.Public discourse,however,was dominated by geopolitical tensions,conflict,and short-term economic challenges.Scaling the energy transition to meet net-zero targets seems further down todays agenda.Hari VamadevanRegional Director,UK&Ireland,Energy Systems,DN

15、V2DNV Energy Transition Outlook UK 2024CONTENTSENERGY SUPPLYCCS&HYDROGENENERGY EXPENDITUREEMISSIONSENERGY DEMANDELECTRICITY&GAS POLICYCONTENTS!Click on the section you want to explore Foreword 2 Executive Summary 4 1 Introduction 10 1.1 About this Outlook 10 1.2 General assumptions 122 UK climate ch

16、ange policy approach 133 Energy demand 20 3.1 Transport 23 3.2 Buildings 28 3.3 Manufacturing 32 3.4 Non-energy use 344 Electricity and gas grid 35 4.1 Electricity 35 4.2 Power grids 38 4.3 Flexibility and storage 42 4.4 Gas grids 485 Industrial Clusters CCS and Hydrogen 50 5.1 Carbon capture and st

17、orage 50 5.2 Hydrogen 536 Energy supply 58 6.1 Non-renewable energy sources 61 6.2 Renewable energy sources and nuclear 657 Energy expenditure 74 7.1 Energy infrastructure investment 74 7.2 Financing the energy transition 758 UK emissions and climate implications 78 References 86The project team 87D

18、NV Energy Transition Outlook UK 2024EXECUTIVE SUMMARYHIGHLIGHTS:Not on track The UK looks set to miss both its Net Zero by 2050 target and its decarbonization commitments for 2030 Affordable Decarbonization comes with a green dividend for UK households,with average energy spend dropping 40%in the ne

19、xt 30 years Partial decarbonization Low carbon sources to rise from 20%of UK primary energy today to 65%by 2050,but still 35%will be fossil fuelsFalling demand Energy demand will fall by a quarter by 2050 largely due to system efficiency gains from increased electrification Green electricity Demand

20、for electricity increases by+130%,with three quarters of power generation from renewable sources by 205015234We forecast that the UK is not on track to meet either its legally-binding Net Zero by 2050 target or its commitments for 2030 under the Paris Agreement(Figure 1).Our forecast shows that the

21、UKs annual emissions will amount to some 125 MtCO2e in 2050.That implies a significant 85%reduction relative to 1990 levels,but not the 100%reduction by 2050 which the UK legislated for in 2019.Similarly,the UK will also not meet its Nationally Determined Commitment(NDC)of reducing emissions by 68%b

22、y 2030 compared with 1990;we expect an emissions reduction of around 55%by then relative to 1990 levels.In terms of the UK carbon budgets,we forecast that we will get close to meeting carbon budgets up to 2032 but then exceed carbon budget 6(2033-37)by 37%.The transport and buildings sectors are the

23、 major remaining contributors to the total annual emissions in 2050.In transport,a sizeable proportion of vehicles,particularly commercial ones,will continue to be fossil-fuelled,and aviation will continue to emit significantly due to the slow penetration of low-carbon fuels such as synthetic e-fuel

24、s and hydrogen by 2050.Natural gas will still comprise over 50%of final energy demand for buildings in 2050,primarily for space heating.There is clearly an opportunity for government to act more forcefully on the decarbonization of domestic heating.14DNV Energy Transition Outlook UK 2024CONTENTSENER

25、GY SUPPLYCCS&HYDROGENENERGY EXPENDITUREEMISSIONSENERGY DEMANDELECTRICITY&GAS POLICYThe decarbonization of the UK economy is affordable and will,by 2050,reduce average household energy expenditure by nearly 40%relative to 2021 levels(Figure 2).A substantial green prize awaits the UK economy in the fo

26、rm of a cleaner,more efficient,and less expensive energy system.We forecast annual energy infrastructure CAPEX spend to increase from an annual average of GBP 26bn in previous decades to around GBP 38bn per year over the next 30 years.While this is a significant increase in absolute terms,the share

27、of GDP devoted to energy CAPEX expenditure remains relatively stable at just above 1%of GDP across the 2000-2050 period.Over 50%of the energy system investment for the next 30 years will be CAPEX for the addition of new power generation capacity,primarily renewables,and grid infrastructure comprisin

28、g both reinforcement and build-out of new infrastructure to meet the increased annual electricity demand.Approximately 12%of investment will be associated with improving energy efficiency of the UK housing stock.Excluding the costs of house insulation improvements,our forecast shows that total house

29、hold energy costs are expected to drop below 2021 levels by 2026 and then gradually reduce further to nearly 40%below 2021 levels by 2050.The decline in household energy expenditure is driven by increased electrification of both household heating and passenger transport,leading to an overall reducti

30、on in energy demand.2Home heating will remain dominated by natural gas By 2050,only about one third of homes will have heat pumps,but over half of the homes will still use natural gas for heating.Heat pumps are the prime option to decarbonize home heating,but large-scale uptake in the UK is hampered

31、 by costs and insulation requirements:For heat pumps we forecast that the levelized cost of home heating will remain higher than heating with gas boilers for the next 510 years,even with current government support packages for heat pump installation.The main reason for this is the high electricity p

32、rice relative to gas in the current energy market,where the electricity price is around a factor of four higher than gas per kWh.In addition,there is the more structural limitation to heat pump installation potential linked to the insu-lation status of the UK housing stock.Today,based on recorded En

33、ergy Performance Certificate ratings,it is estimated that only approximately 50%of the UK housing stock is suitable for heat pumps.This will gradually change over time as insulation is retro-fitted and new housing stock with better insulation standards is added,but in the medium term this will limit

34、 the percentage of households that can consider a heat pump for replacement of a boiler.The only alternative pathway for decarbonization of home heating at scale would be to replace natural gas with hydrogen in the network.However,we forecast that hydrogen for heating will remain expensive up to mid

35、-century,even with hydrogen production costs reducing to$2.5/kgH2 by 2050,which would still result in hydrogen prices being double the price of natural gas per kWh.Furthermore,there are concerns about the availability of sufficient green hydrogen to heat a large part of the UK housing stock.As a res

36、ult of the above factors,we forecast that,at least for the next 510 years,the majority of UK homeowners will replace their boiler at the end of its lifetime simply with a new boiler.Heat pump installations will overtake boiler replacements only around 2040.Short of a major policy shift by the UK gov

37、ernment,this will lock in the domestic heating system to natural gas with nearly 60%of homes still burning natural gas for heating by 2050.5DNV Energy Transition Outlook UK 2024CONTENTSENERGY SUPPLYCCS&HYDROGENENERGY EXPENDITUREEMISSIONSENERGY DEMANDELECTRICITY&GAS POLICYUKs primary energy supply wi

38、ll shift from fossil fuels to low-carbon sources,with the latter rising from 20%of primary energy today to 65%by 2050(Figure 3).Today,close to 80%of all UK primary energy comes from fossil fuels,of which just over 50%is produced in the UK and the remainder imported.Renewables supply 13%and the remai

39、ning 7%is covered by nuclear energy.Even with the expected build-out of renewables,this heavy reliance on fossil fuels will remain for the next decade,only reducing to 70%by 2031.By 2050,this picture will change significantly with low-carbon supply sources meeting nearly 65%of the UK energy needs.Mo

40、re than half of that will be via variable renewables(wind and solar)and the remainder split between bioenergy and nuclear.However,we forecast that despite this strong shift,a third of the UK primary energy supply will still be fossil fuels by mid-century,dominated by their remaining unabated use in

41、household heating and aviation.CCS is benefiting in the short term from the announced GBP 20bn Government support and over the long term will be driven by the expected increase in the carbon price.Based on our latest estimates,carbon prices for Europe(including UK)will increase significantly between

42、 today($75/t)and 2050($250/t).Current views indicate the carbon price could reach$150/t in 2030 and$200/t in 2035.This would mean that the cost of emitting CO2 would start to exceed the cost of capturing CO2 for most applications in the 2030-35 period,incentivizing installation of CCS for industrial

43、 use,power generation and H2 production.As part of our forecast we have assessed the current planned/supported Track 1 CCS projects which would already result in 11 MtCO2/year CCS capacity in 2030 and 19 MtCO2/year by 2035.However,as a result of the increasing carbon price,we forecast that the trend

44、 will actually be higher,reaching 40 Mt/yr in 2035.This ramp up of CCS capacity will require the availability of sufficient transportation,injection and storage capacity,but in our view that should not be a major constraint in that time frame,considering the large potential for CO2 storage in UK Con

45、tinental Shelf.The future for Carbon Capture and Storage(CCS)is looking more promising36DNV Energy Transition Outlook UK 2024CONTENTSENERGY SUPPLYCCS&HYDROGENENERGY EXPENDITUREEMISSIONSENERGY DEMANDELECTRICITY&GAS POLICYUK final energy demand will no longer grow in lock-step with GDP and popu-lation

46、 growth;in fact,energy demand will fall by a quarter by 2050 due mainly to electrification(Figure 5).An electrified energy system is more efficient than a fossil-fuelled energy system.Hence,the predicted shift towards electricity as the key future energy carrier will de-couple UK energy demand growt

47、h from economic growth.Today,three quarters of all energy is supplied to customers via two fossil fuel carriers:natural gas mainly for the buildings and manufacturing sectors and oil,mainly for the transport sector.Only 17%of UK energy is delivered to customers in the form of electricity.By 2050,ele

48、ctricity will deliver close to half of UK final energy demand,mainly because of electrification of road transport and heating of a third of UK households.With electrification and other efficiency improvements,the energy intensity of GDP will fall.Not only will large losses to heat in thermal generat

49、ion be avoided,but the electrification of end-uses will drive very meaningful energy savings.Electricity demand in the UK will increase by a factor of 2.3 by 2050 compared to today(Figure 6).Electricity generation in the UK will increase from 315 TWh/yr today to 700 TWh/yr in 2050.At present,the big

50、gest share(40%)of power generation output in the UK originates from unabated gas-fired power plants.As a result of decarbonization incentives and the declining costs for renewable electricity generation,this share is expected to gradually decline to 3%by 2050,by which time all remaining gas-fired un

51、its will primarily use hydrogen as fuel.In contrast,power generation from variable renewable 45resources will grow dramatically from 90 TWh/yr today to 560 TWh/yr in 2050.The increase in electricity demand will require the addition of approximately 140 GW of new generation capacity over the next 30

52、years,with most of these additions(90%)being new wind and solar farms.There is also the need for some new gas/biomass-fired units and nuclear capacity to provide dispatchable power and base load.In parallel,there will also be a continued need to strengthen and expand the grid to connect all the new

53、power sources and carry the additional power loads.Most of the growth in UK wind will be in locations at some distance from the major demand centres(e.g.Scottish renewables feeding the rest of the UK),requiring significant investment in the UK transmission grid.Considerable investment in energy stor

54、age will also be needed,along with demand-response capabilities.7DNV Energy Transition Outlook UK 2024CONTENTSENERGY SUPPLYCCS&HYDROGENENERGY EXPENDITUREEMISSIONSENERGY DEMANDELECTRICITY&GAS POLICYWe forecast hydrogen production to reach 1 Mtonnes/yr in 2030,of which only 60%will be low carbon.This

55、would be equivalent to 5 GW of low carbon hydrogen production by 2030 versus the government target of 10 GW.This forecast is in line with the current expectations around timelines and capacities for the selected hydrogen projects in the industrial clusters,assuming they will receive further governme

56、nt support to ensure the projects reach Final Investment Decision(FID)in the next few years.Hydrogen production will then grow to 4.6 Mtonnes by 2050,equivalent to 10%of final energy demand in the UK.Half of the hydrogen and its derivatives will be used for transport,25%in industry and 25%for dispat

57、chable low-carbon power generation.Our forecast shows that the main driver for long term hydrogen demand is the increasing need for hydrogen derivatives in the transport sector to meet national and international fuel directives especially for maritime,which has ambitious decarbonization targets and

58、whose emissions will also be included in the EU Emissions Trading Scheme.Without a clear business model or market support mechanism,high production costs would make H2 generally uncompetitive for industrial use and domestic heating even by 2050.By 2050,we predict a 50/50 split between blue hydrogen(

59、produced from natural gas through reformers with CCS)and green(electrolytic)hydrogen.With use of hydrogen mainly limited to industrial clusters and power generation,it is expected that hydrogen will mainly be produced/consumed within the clusters.This may limit the need for a potential national hydr

60、ogen transmission system to balance demand and supply between clusters and transmission of electrolytic hydrogen from renewable generation sites.Electricity generation will shift funda-mentally away from fossil fuels to variable renewable energy sources(VRES)which will be supplying three quarters of

61、 total electricity in 2050 compared to only a quarter today(Figure 7).The significant VRES penetration in electricity generation will cause a major increase in supply variability around the average hourly grid throughput compared to today(Figure 7).Todays electricity system is subject to a 12%annual

62、 variability primarily due to variability in demand(40 GW 5 GW).This variability is mitigated through an equivalent 12%flexibility mainly provided through dispatchable gas-fired generation which can be ramped up and down quickly to match demand fluctuations.By 2050,the electricity system will nearly

63、 see a doubling in variability up to 20%caused by the increased penetration of variable renewables in the supply mix(90 GW 20 GW).This will require a commensurate doubling of flexibility response within the overall electricity system.The majority of this flexibility(85%)would be provided roughly in

64、equal measure by three key systems within the UK electricity system:190 GWh of utility-scale battery storage,20 GW of dispatchable thermal generation and some of the 35 GW total electrolysis capacity to convert electricity to hydrogen during periods of excess wind and solar generation.The remainder

65、of the necessary flexibility(15%)is provided by interconnectors with other power grids in Europe both in terms of exporting/storing excess supply during times of high VRES generation or supplying back-up power during supply shortages.The development of the UK hydrogen market needs significant suppor

66、t 68DNV Energy Transition Outlook UK 2024CONTENTSENERGY SUPPLYCCS&HYDROGENENERGY EXPENDITUREEMISSIONSENERGY DEMANDELECTRICITY&GAS POLICYLarge-scale electrification using renewable electricity sits at the heart of the UK energy transition.The UKs early ambition and action to champion the energy trans

67、ition did result in a strong start for greening the electricity supply through progressive policies around Contracts For Difference frameworks and competitive strike-prices.This has resulted in a strong build-out of wind and solar capacity,reaching an impressive total of 45 GW today(45%of the total

68、installed UK generation capacity).That progress now seems to be stalling,with the disappointing latest wind allocation round results,uncertainty around decarbonizing home heating and the role of hydrogen in the UK.Consequently,as our findings show,on its current trajectory the UK will not meet its n

69、et zero by 2050 target unless the government increases policy support to a low-carbon future.Based on our findings,we would recommend that the following specific issues are addressed urgently to close the gap to net zero:Firstly,to succeed on the electricity supply side,it is imperative that we deli

70、ver the necessary step-change to treble the historical electricity investment levels to ensure the grid will be the enabler,not a blocker to the energy transition.To meet the investment challenge,the way our networks are planned,built and operated needs to adopt a fundamentally different approach.Cr

71、itically,policy makers and regulators need to accept that the levels of risk associated with delivering this step-change will be different from risks that previously were deemed acceptable.Secondly,there needs to be a focus on reducing the energy demand side with a strong push on energy efficiency m

72、easures,including electrifi-cation of home heating and road transport,and other demand-side measures to reduce energy consumption.The government needs to actively engage with industrial clusters on emissions reduction and with society at large on energy efficiency/electrification,waste reduction,lif

73、estyle changes,travel reduction and modal shifts in transport.Our model accounts for behavioural changes only to a limited extent but we see this as a key element of the transition story.Combining the supply and demand side of the equation,the UK needs a more integrated systems approach across all k

74、ey energy vectors,so we can define and implement the optimum decarbonized energy system for the UK as a whole.Currently we see competition between industrial clusters for allocation of hydrogen and CCS capacity,consumer choice mainly driving the domestic heating decarbonization and general uncertain

75、ty about the future of gas.The new National Energy System Operator(NESO)needs to play a pivotal part in this key system definition.Our forecast clearly shows that the current electricity pricing model is not providing sufficient incentive for consumers to transition from gas to electricity for domes

76、tic heating.Today the consumer electricity price is 4x the price of natural gas per kWh,caused by a combination of factors:the marginal wholesale elec-tricity pricing model(where prices are generally set by gas-fired power plants),significant environmental levies and indirectly because fossil fuel e

77、lectricity generation is subject to carbon taxes.It is important to re-design the future electricity/gas markets to ensure fair competition between all available fuel sources.These new energy markets should reflect for each source the actual capture price,the true impact of carbon costs,and an equal

78、 distribution of any charges associated with the energy transition.For the hard-to-abate sectors,the UK needs to develop a clear business plan for the hydrogen market,based on a good understanding of what will be driving hydrogen demand in the UK,and determine where it is essential or economical to

79、incentivize hydrogen production capacity.This should cover the role of hydrogen for the future maritime/e-fuels market,specific industrial applications and as a key back-up option for use of excess renewable energy.We believe that the UK can meet its 2050 net zero target,but this will require clear

80、early policy decisions to overcome the inherent system inertia and ensure that the transition is accelerated.RECOMMENDATIONS9DNV Energy Transition Outlook UK 2024CONTENTSENERGY SUPPLYCCS&HYDROGENENERGY EXPENDITUREEMISSIONSENERGY DEMANDELECTRICITY&GAS POLICY1.1 About this OutlookThis report,the UK En

81、ergy Transition Outlook(UK ETO),describes the energy future of the UK through to 2050.The analysis,the model framework behind it,the method ology,the assumptions,and hence also the results lean heavily on DNVs global forecast,Energy Transition Outlook 2023(DNV,2023a).The UK model is also part of the

82、 same global Energy Transition Outlook(ETO)model,where the UK is modelled as a separate region interacting with other regions of the world.This is necessary,because the UK energy system is not standalone and is connected to the European and global energy systems physically(e.g.via pipelines and grid

83、s);politically(carbon prices and other policies);technologically(learning rates,technology costs,technical solutions,etc.);and,economically(cost of materials,market prices,etc.).The DNV model takes this into account by modelling the UK as a stand-alone region linked to the other regions in Europe an

84、d globally,and looks at global,regional,and domestic supply and demand balances integrating it into one single model.Unlike most energy forecasters,DNV does not develop scenarios.Not because we know what the future will be like,but because not all futures are equally likely,and DNV sees a lot of mer

85、it in giving a best estimate.Hence,our analysis produces a single best-estimate forecast of the energy future for the UK,where we also discuss uncertainties and sensi-tivities.This forecast accounts for expected develop-ments in policies,technologies,and associated costs,as well as some behavioural

86、changes.The forecast also provides a basis for assessing whether the UK is likely to meet its energy and climate-related targets.Our approachOur model simulates the interactions over time of the consumers of energy(transport,buildings,manufacturing,and so on)and all sources of supply.It encompasses

87、demand and supply of energy globally,and the use and exchange of energy between and within 10 world regions.To tailor the model for this project,we added the UK as a standalone region by splitting region Europe into two regions:UK and Europe-without-UK.In this way,we derive separate forecast results

88、 for the UK,along with the other 10 world regions.The analysis covers the period 19902050,with changes unfolding on a multi-year scale that in some cases is fine-tuned to reflect hourly dynamics.We continually update the structure of our model and the input data.In this report,we do not repeat all t

89、he details on methodology and assumptions from the ETO 2023 report but refer to that open report for further details.Figure 1.1 overleaf presents our model framework.The arrows in the diagram show information flows,starting with population and GDP per person,while physical flows are in the opposite

90、direction.Policy influences all aspects of the energy system.Energy-efficiency improvements in extraction,conversion,and end use are cornerstones of the energy transition.We use policy and behavioural effects,either explicitly(e.g.the effect of increased recycling on plastics demand)or implicitly(e.

91、g.the impact of expected electricity prices on electrification of heating).We estimate sectoral energy demand in two stages.First,we estimate the energy services provided,such as passenger-kilometres of transport,tonnes of manufacturing,or useful heat for water heating.Then we use parameters on ener

92、gy efficiency and energy-mix dynamics to forecast the final energy demand by sector and by energy carrier.Our main priorities when designing the ETO model were to include three key characteristics of the energy system:interconnectedness,inertia,and non-linearity.Whereas many energy models are Contin

93、ued development of proven technology,not uncertain breakthroughsMain policy trends included;caution on untested commitments,e.g.NDCs,etc.Behavioural changes:some assumptions made,e.g.linked to a changing environmentOur best estimate,not the future we wantA single forecast,not scenariosLong term dyna

94、mics,not short-term imbalancesLong term dynamics,not short-term imbalancesContinued development of proven technology,not uncertain breakthroughsMain policy trends included;caution on untested commitments,e.g.NDCs,etc.Behavioural changes:some assumptions made,e.g.linked to a changing environment1 INT

95、RODUCTION 10DNV Energy Transition Outlook UK 2024CONTENTSENERGY SUPPLYCCS&HYDROGENENERGY EXPENDITUREEMISSIONSENERGY DEMANDELECTRICITY&GAS POLICYeconometric and assume equilibrium conditions,our model does not.Instead,it simulates the conse-quences of its assumed goals,parameters,and inter-relationsh

96、ips.The model explicitly reflects the delays in reaching a desired state and,consequently,can forecast the path and speed of energy transitions.Our model does not assume optimality or ration-ality as a prerequisite.It recognizes that the energy system evolves because of many individual deci-sions ba

97、sed on limited information,rather than one decision-maker that would minimize total cost of the system.Consequently,our forecast is not necessarily the cheapest or most efficient future but a path-dependent and imperfect future.Our modelling approach,as well as the calibration of modelling input val

98、ues,becomes increasingly sensitive when we model a country compared with a region or globally.This is especially prevalent when we consider exogenous or outside assumptions such as policies or factors that are specific to the country which have a significant effect in forcing the model to select sol

99、utions that are not necessarily the cheapest option.Such factors could be energy security,job creation,or global climate commitments.These key policy assumptions are discussed in Section 2.POPULATIONGDP PER PERSON Source ofdemand TRANSPORTBUILDINGSSpace heating&cooling,water heating,cooking,and appl

100、iances&lightingMeasured in tonne-miles,passenger-kilometres,and vehicles MANUFACTURINGProduction output measured as Manufacturing Value AddedOTHER Road Maritime Aviation RailPipelines Residential Commercial Manufactured goods Base materials Iron and steel Construction and mining FeedstockTRANSPORTFi

101、nal energydemand BUILDINGSMANUFACTURINGNON-ENERGYENERGY SECTORSOWN USE POWER GENERATIONHYDROGENOIL REFINERIES Electricity Direct heatEnergytransformation Solar Wind Hydropower Nuclear Bioenergy GeothermalCrude oil Natural gas CoalPrimaryenergy supply FOSSIL FUEL EXTRACTION ENERGY EFFICIENCYDIRECT US

102、EPOLICY11DNV Energy Transition Outlook UK 2024CONTENTSENERGY SUPPLYCCS&HYDROGENENERGY EXPENDITUREEMISSIONSENERGY DEMANDELECTRICITY&GAS POLICY1.2 General assumptions Key input assumptions in the ETO model are in the areas of population,economic development,technology development,and policy.Population

103、We use the research and results from the UK Office for National Statistics.According to its January 2022 release of its 2020-based interim forecast(ONS,2022),the UK population is forecast to grow from 67.5 million people today to reach 72.8 million in 2050.Economic developmentGDP per capita is a mea

104、sure of the standard of living in a country and is a major driver of energy consumption in our model.Our future GDP per capita numbers are based on IMFs World Economic Outlook(IMF,2022)until 2027 and on OECDs Long-Term Projections(OECD,2021)after that.At infrequent intervals,extraordinary events res

105、ult in notably different GDP and productivity changes.The 2020 COVID-19 outbreak caused such a change,with negative growth figures as a result.The GDP change for the UK is therefore 9.0%in 2020,+7.2%in 2021,and+3.5%in 2022,thereafter returning to the growth rates given by the DNV GDP model.For the U

106、K,2021 GDP was GBP 2,300 billion,while in 2050 it is expected to be at GBP 3,300 billion.This implies a compound annual growth rate(CAGR)of 1.3%per year.Productivity increases from GBP 34,000 to GBP 46,000 per person in the same period in constant British pounds.Technology developmentDNV bases its f

107、orecast on the continued develop-ment of proven technologies in terms of costs and technical feasibility,not on uncertain breakthroughs.However,during the period covered by this Outlook,the technologies we currently consider most promising might shift due to changes in levels of support,and varying

108、cost reductions.Other technologies may achieve a breakthrough,such that they become cost competitive.With technology learning curves,the cost of a tech-nology typically decreases by a constant fraction with every doubling of installed capacity.This cost learning rate(CLR)dynamic occurs because ongoi

109、ng market deployment brings greater experience,expertise,and industrial efficiencies,as well as further R&D.Technology learning is global,and it is the global capacity that is used in learning-rate calculations.Learning rates cannot easily be established for technologies with low uptake and which ar

110、e still in their early stages of development.In such cases,calculations rely instead on insights from similar,more mature technologies.Examples of this include carbon capture and storage(CCS)other than that used in enhanced oil recovery,and next-generation electrolysis.Solar photovoltaic(PV),batteri

111、es,and wind turbines are proven technologies with significant grounds for establishing learning rates with more confidence.Further down the experience spectrum are oil and gas extraction technologies where unit production costs and accumulated production levels are high and easy to establish.However

112、,hydro-carbons face pressures from the structural decline in oil demand in tandem with rising extraction costs and carbon prices.For all technologies,it is necessary to separate out the cost of the core technology(e.g.PV panels)from supporting technologies(e.g.control systems and installation kits).

113、Typically,the latter have a lower learning rate.For PV,core technologies have a CLR of 26%,while balance of supply has only 9%.For some technologies,like batteries,the core technology is almost all there is,and so the highest learning rate dominates.For other technologies,like unconventional gas hyd

114、raulic fracturing,other cost components dominate.Core technology learning rates that we have used through to 2050 in our forecast include 19%for batteries,16%for wind,and 26%for solar PV but falling to 17%later in the forecast period.Oil and gas development has a learning rate of 10%to 20%,but the a

115、nnual cost reduction is minor because it can take decades for the cumulative installed capacity to double.12DNV Energy Transition Outlook UK 2024CONTENTSENERGY SUPPLYCCS&HYDROGENENERGY EXPENDITUREEMISSIONSENERGY DEMANDELECTRICITY&GAS POLICY13Since 1990,the UK has made good progress in cutting GHG em

116、issions by 49%while GDP has expanded by around 80%.To meet its legally binding net-zero target by 2050 will,however,require a step-change in decarbonization levels across the entire economy,and particularly in the harder-to-abate sectors buildings,transport,and manufacturing.2 UK CLIMATE CHANGE POLI

117、CYThis chapter summarizes the UKs legislation and policies to deliver on its climate change commit-ments.Our forecast is published amid multiple uncertainties that are likely to impact the UK energy transition,namely high inflation,high interest rates,energy price volatility,a cost-of-living crisis

118、and increased global competition in the green energy race.Even more reason,in our view,to formulate and implement policies that will accelerate a transition towards a more secure,efficient,and affordable energy system that promises to deliver a substantial green prize to hard-pressed UK consumers.Th

119、e reality is that these factors have resulted in the UK Government softening some of its green policies in its September 2023 announcement on net zero while still committing to deliver on its climate-change commitments(Gov.UK,2023a).With general elections looming in the UK in 2024,we expect further

120、short-term policy announcements.However,our Outlook is designed to focus on long-term trends,and we have assumed there will be no change in the overall UK Government ambition to deliver on net zero by 2050.UK climate-change commitments The Climate Change Act 2008 underpins the UKs approach to reduci

121、ng its GHG emissions to mitigate the impact of climate change.The Act sets out the 2050 emissions target and provides interim targets expressed in five-yearly carbon budgets which are established based on advice from the Climate Change Committee(CCC)an independent statutory body set up under the Cli

122、mate Change Act.The original target within the Climate Change Act was to reduce the 2050 GHG emissions by 80%compared to 1990 levels.The CCC recommended levels of emis-sions reduction for five carbon budgets spanning the years 2008 to 2032 based on this original target.In June 2019,the UK legislated

123、 to reach net zero by 2050,thereby amending the original target within the Climate Change Act 2008.The net-zero target implies deep decarbonization of economic sectors,with any residual emissions in 2050 being offset by greenhouse gas removals(GGRs).Such deep decar-bonization is a major challenge an

124、d is reflected in the CCCs recommendations on the sixth carbon budget CONTENTSENERGY SUPPLYCCS&HYDROGENENERGY EXPENDITUREEMISSIONSENERGY DEMANDELECTRICITY&GAS POLICYDNV Energy Transition Outlook UK 202414Changes in electricity generation mix has resulted in a reduction of 70%in emissions,as shown in

125、 Figure 2.2.Additionally,the decline in energy-intensive industries coupled with increased process and energy efficiencies contributed to a two-thirds reduction in emissions from the industry sector.The transport and buildings sectors have seen much smaller changes in emissions over the 30-year peri

126、od.UK carbon budgets To date,the UK has met its first three carbon budgets CB1(20082012),CB2(20132017)and CB3(20182022).Subsequent carbon budgets would require significant reduction in emissions with the five-yearly average emissions going from around 433 MtCO2e per annum for CB3 to around 190 MtCO2

127、e per annum for CB6(20333037)representing a reduction of 56%,as shown in Table 2.1.Such a reduction would need extensive decar-bonization across all economic sectors,with CB6 requiring a step-change in emissions reduction.To achieve this level of emissions reduction means that the roadmaps for addre

128、ssing the harder-to-abate sectors including buildings,transport,and manufacturing need to be clearly defined within the next years.TABLE 2.1Carbon budgets past,present,and futurePeriodBudget(MtCO2e)Outturn(MtCO2e)5-yearly average(MtCO2e)CB1200820123,0182,996599CB2201320172,7822,554511CB3201820222,54

129、42,315463CB4202320271,950-390CB5202820321,725-345CB620332037965-193*Estimated figure based on an assumed 2%reduction in emissions for 2022 compared to 2019(pre-Covid emission levels)*5-yearly averages for CB1,CB2&CB3 based on outturn figures(CB6),for the period 2033 to 2037.This first carbon budget

130、set under the net-zero target calls for a step-change in climate policy.In June 2021,the UK government set in law the sixth carbon budget which commits the UK to reduce its GHG emissions by around 78%by 2035 compared to 1990 levels.Under the Paris Agreement,the UK also committed to a 68%reduction in

131、 GHG emissions by 2030 on 1990 levels in its Nationally Determined Contribution(NDC)submitted in December 2020.This target is,however,non-binding.Status of UK emissions Greenhouse gas emissions have fallen 49%while the economy has grown by around 80%over the period 1990 to 2022.This corresponds to a

132、 70%reduction in GDP emissions intensity from 0.58 kgCO2 per US dollar of real GDP to 0.17 kgCO2/USD real GDP,with GDP measured in 2022 terms for comparison.Per capita emissions in 2022 averaged around 6.5 tCO2,55%less than in 1990(14.4 tCO2).The significant fall in emissions and decoupling from GDP

133、 growth can be primarily attributed to the change in fuel mix for electricity generation with the shift from coal to gas and,recently,to renewables.CONTENTSENERGY SUPPLYCCS&HYDROGENENERGY EXPENDITUREEMISSIONSENERGY DEMANDELECTRICITY&GAS POLICYDNV Energy Transition Outlook UK 202415Delivering a Net Z

134、ero electricity mix by 2035 will require a multi-stakeholder approach to address the physical and supply constraints across the electricity value chain.bonize its electricity generation,all gas-fired plants post-2035 should be abated with use of carbon capture and storage(CCS)or should use hydrogen.

135、The economics of both CCS and hydrogen are dependent on business models which are yet to be finalized by BEIS.Wind and solar accounted for around 26%of electricity generation in 2022.The UK is targeting a substantial acceleration of the deployment of renewables with a target of 50 GW of offshore win

136、d by 2030 and around 70 GW of solar by 2035.The UK has an ambition to decarbonize its electricity generation by 2035 subject to security of supply.This reflects the recommendation in the CCCs sixth carbon budget,which under its Balanced Net Zero Pathway assumes a reduction in the carbon intensity of

137、 gene-ration from around 220 gCO2/kWh in 2019 to around 10 gCO2/kWh in 2035 and 2 gCO2/kWh in 2050.Over the period 19902022,the UK has significantly decarbonized its electricity generation,moving from primarily fossil-fuel generation in 1990 to over 55%of low-carbon generation in 2022,as illustrated

138、 in Figure 2.3.This implies a step-up in build-out rates for both offshore wind and solar.For offshore wind,the implied build-out rate in the UK government target is around 4 GW/yr up to 2030 from around 1.5 GW/yr over the period 20172019(excluding the COVID-impacted years).For solar,the build-out r

139、ate has been around 0.5 GW/yr over recent years and would need to ramp up to a similar 4 GW/yr up to 2035.Electricity generation from biomass(including Energy from Waste,EfW)has also increased signif-icantly over the period 19902022.This includes biomass from organic waste and residues from agricult

140、ure and livestock production,wood from forests,energy crops and aquatic biomass.There is currently no specific government target for elec-tricity generation from biomass although the CCC in its sixth carbon budget indicated that around 0.7 million to 1.4 million hectares of land could be dedicated t

141、o energy crop production in the UK.The key features of the on-grid generation evolution over the period 19902022,and the next steps required to deliver a decarbonized generation mix,are:Significant phase-out of coal and oil-fired gener-ation from 222 TWh in 1990 to around 8 TWh in 2022,a 97%reductio

142、n in fossil-fuel generation.Over that period,the carbon intensity of the on-grid generation fell from around 730 gCO2/kWh to around 200 gCO2/kWh.Increase in gas-fired generation from 5 TWh in 1990 to 137TWh in 2022.For the UK to decar-How the UK electricity mix is changingCONTENTSENERGY SUPPLYCCS&HY

143、DROGENENERGY EXPENDITUREEMISSIONSENERGY DEMANDELECTRICITY&GAS POLICYDNV Energy Transition Outlook UK 202416Carbon Budget Delivery Plan To deliver on its legally binding carbon budgets CB4,CB5 and CB6,the UK published a Carbon Budget Delivery Plan(CBDP)in March 2023.The CBDP provides details of the a

144、nticipated emissions reductions(where quantified)to 2037 of the proposals and policies put forward by the government.Most of the proposals and policies are included in strategy and policy documents that the government has published over the last two years(see Box 1).Key points from some of the docum

145、ents are provided below.Ten Point Plan for a Green Industrial Revolution November 2020 The Ten Point Plan sets outs ambitions to deliver green growth for the UK with specific targets for accelerating the development of offshore wind and low-carbon hydrogen,delivering new nuclear projects,shifting to

146、 zero-emission vehicles,and aiming for energy-efficient and low-carbon buildings.Some elements of the plan were updated and extended by the British Energy Security Strategy(BESS)(UK Government 2022)issued following Russias invasion of Ukraine,to reduce the level of UK dependence on oil and gas from

147、Russia.Energy White Paper:Powering our Net Zero Future December 2020 This confirmed the commitments made in the Ten Point Plan and pledged to:Commit to progress planning for a new nuclear power station to the point of Final Investment Decision(FID)before the end of this parliament.Consult on the cha

148、nges to the Gas Act 1986 to enable decarbonization of gas networks by allowing a greater proportion of biomethane and hydrogen in them.Establish a new UK Emissions Trading System.This has been launched.Consult on whether it is appropriate to end gas grid connections to new homes being built from 202

149、5.The prospective gas boiler ban is yet to be officially confirmed within the Future Homes Standard guidance.Require all rented non-domestic buildings to be Energy Performance Certificate(EPC)Band B by 2030.A separate change to the Domestic Minimum Energy Efficiency Standard(MEES)is currently progre

150、ssing through parliament and would require EPC C for new domestic rented properties by 2025,and for all rented properties by 2028.In its September 2023 announcement on net zero,the government has scrapped the latter two requirements.BEIS Net Zero Strategy October 2021 Outlines the plans for reducing

151、 emissions from each sector of the UKs economy to meet the legally binding carbon budgets(CB4 to CB6).The Net Zero Strategy provides an indicative pathway to meeting the sixth carbon budget.The policies within the strategy document build on those in the Ten Point Plan,the Energy White Paper,and on s

152、ector-specific strategies including the North Sea Transition Deal,Industrial Decarbonisation Strategy,Transport Decarbonisation Plan,Hydrogen Strategy and the Heat and Buildings Strategy.Some of the key energy-related policies within the Net Zero Strategy document include:A fully decarbonized electr

153、icity system by 2035 subject to security of supply;Electrification of oil and gas installations and addressing venting and flaring;Decarbonization of industry through resource and energy efficiency,fuel-switching,and deploying carbon capture,utilization and storage(CCUS);All new heating appliances i

154、n homes and workplaces to be low-carbon by 2035.British Energy Security Strategy(BESS)April 2022 This sets out how the UK will accelerate home-grown power for greater energy independence.The strategy was published in response to Russias invasion of Ukraine and the rise in energy prices.BESS increase

155、d the targets for low-carbon power generation compared to previous targets set out in the Net Zero Strategy.In particular,there was an increase in ambition in relation to nuclear,renewables,and hydrogen,as well as support for domestic production of natural gas.CONTENTSENERGY SUPPLYCCS&HYDROGENENERGY

156、 EXPENDITUREEMISSIONSENERGY DEMANDELECTRICITY&GAS POLICYDNV Energy Transition Outlook UK 2024172008UK climate changelegal frameworkUK system-level policies and targetsJune 2019November 2020October 2021March 2021August 2021March 2022April 2022July 2021October 2021TABLE 2.2Key non-binding decarbonizat

157、ion policies and targets from UK strategy documentsUK policy ambitions and targetsOffshore wind50 GW including up to 5 GW floating wind by 2030.11 GW of installed offshore wind capacity in 2021 with build-out rate of around 1 GW/yr over last five years.Target implies a ramp-up in build-out rate of a

158、round 4 GW/yr over the next 8 years.Onshore windThere is currently a total of 15 GW of installed onshore wind capacity.Despite a September 2023 amendment,stricter planning consent in England implies that it is difficult to get planning permissions for any new onshore wind farms.SolarAmbition for a 5

159、-fold increase in rooftop and ground-mounted solar up to 70 GW by 2035.There currently is 15 GW of installed solar capacity in the UK.NuclearAmbition for one large-scale nuclear plant to reach Final Investment Decision(FID)by 2024 with two projects to FID in next Parliament.By 2050,UK aims to have 2

160、4 GW of installed nuclear capacity.In 2022,UK had 8 GW of nuclear capacity with five of the six plants going offline over the next 10 years and one plant under construction.Hydrogen productionAim of 10 GW of low-carbon hydrogen production capacity by 2030 with at least 50%from electrolytic hydrogen.

161、By 2025,the ambition is to have up to 1 GW of electrolytic hydrogen in construction or operational.UK also plans to develop new business models for hydrogen storage and infrastructure by 2025.CCUSAmbition to deliver four carbon capture,utilization and storage(CCUS)clusters capturing 2030 MtCO2 per y

162、ear across the economy by 2030,including 6 MtCO2 of industrial emissions.Business models for CCUS are yet to be finalized.Heat pumps and gas boilersTarget of 600,000 heat-pump installations by 2028 coupled with an ambition that by 2035,no new gas boilers will be sold.By 2050,the aim is that all heat

163、ing systems are compatible with net zero.The government introduced the Boiler Upgrade Scheme which provides GBP 450 million of grant funding over three years from 2022 to 2025 to support the decarbonization of heat in buildings.Installation of heat pumps has averaged 30,000 over the past three years

164、.There are currently 280,000 such installations in the UK,placing the country at the bottom of the European heat-pump league(Figure 2.4)(New Scientist,2022).Road transportA ban on sales of new petrol and diesel cars and vans by 2035.Aim to end sale of all new,non-zero emission road vehicles by 2040,

165、including motorcycles,buses,and HGVs(subject to consultation).AviationAmbition is for UK aviation to meet net zero by 2040(subject to consultation)and UK shipping by 2050.For aviation,UK aims to develop a UK sustainable aviation fuel(SAF)mandate to enable delivery of 10%SAF by 2030.RailAmbition for

166、all diesel-only trains to be removed from the network by 2040 and achieve a net-zero rail network by 2050.Table 2.2 summarizes some key non-binding policies and targets from these strategy documents.The policies and targets depend in many cases on the June 2021December 2020Sector-specificstrategiesA

167、mendment to Climate Act 2008 UK legislates for net zero by 2050Climate Change Act 2008 UK legislation for 80%reduction of GHG emissions by 2050 on 1990 levelsUK announces its 2030 NDC to reduce all gas emissions by at least 68%by 2030 on 1990 levelsSixth carbon budget(CB6)set in lawdevelopment of bu

168、siness models and on further incentives for uptake of technologies and scaling of supply chains.Ten Point Planfor a GreenIndustrialRevolutionBritish EnergySecurity StrategyNet ZeroStrategyEnergy White PaperIndustrialDecarbonizationStrategyTransportDecarbonizationPlanHydrogenStrategyHeat&BuildingsStr

169、ategyNorth SeaTransition DealCONTENTSENERGY SUPPLYCCS&HYDROGENENERGY EXPENDITUREEMISSIONSENERGY DEMANDELECTRICITY&GAS POLICYDNV Energy Transition Outlook UK 202418From our main ETO report(DNV,2023a)we have a comprehensive list of the policy factors influencing the forecast.The same policy factors ar

170、e incorporated in this analysis with the following adjustments for the UK:Implementing UK policy in our UK Energy Transition OutlookOur model is informed by the policies and targets set out in the UK Government strategy documents.We have also factored in our own assessments of the state of play in e

171、conomic sectors based on our global energy sector knowledge,our technical and commercial expertise,and discussions with a broad range of stakeholders.Our model includes assumptions on population,GDP,technology costs,learning rates,performance and carbon price,among many others.Based on the input ass

172、umptions and built-in cost competition(and cost learning),the model forecasts the uptake and development of various energy-related technologies in different sectors.As such,our ETO UK forecast does not necessarily assume that all the current government targets and ambitions will be met.FIGURE 2.4Pol

173、icy factors included in our Outlook7.Bans,phase-out plans,mandates8.Carbon pricing schemes9.Fuel,energy,and carbon taxation4.Hydrogen support5.CCS,DAC support6.Energy-efficiency standards 1.Renewable power support2.Energy storage support3.Zero-emission vehicle support10.Air pollution intervention11.

174、Plastic pollution intervention12.Methane intervention Zero-emission vehicle support Electric vehicles(EVs)will receive government support to accelerate their market share towards a ban on new internal combustion engine(ICE)cars in 2030 and phase-out of hybrid vehicles by 2035.The support schemes for

175、 EVs in the commercial vehicle segment will be in place,until they reach 90%of new commercial vehicle sales in 2040.The support scheme for hydrogen in the commercial vehicle category will help uptake of fuel cell electric vehicles(FCEVs)based on hydrogen from the early 2030s as production of hydroge

176、n becomes viable,to reach a final new sales share of 10%in the commercial vehicle segment by 2050.Hydrogen Financial support will be provided to implement carbon capture at existing hydrogen production facilities for ammonia production and refining.Blue and green hydrogen production projects will re

177、ceive support to reduce the cost of hydrogen and enable uptake of hydrogen as an energy carrier,starting with industrial clusters and blending into the gas network.All new boilers will be hydrogen-ready from 2030.Hydrogen blending into the gas network will start before hydrogen reaches cost parity w

178、ith gas.Carbon capture and storage Support for blue hydrogen uptake will enable about a quarter of all CCS uptake by 2050.Other CCS development will be commercially driven,incentivized by the carbon price,subject to capacity-building constraints.Carbon price The UKs carbon price will be in line with

179、 the EU ETS price,reaching GBP 77/tCO2 in 2030 and GBP 104/tCO2 in 2050.Fuel tax Petrol tax increases at a quarter of the carbon-price growth rate.Electricity tax rates are halved for industrial consumers by 2050 and reduced by two thirds for residential consumers by 2040.Hydrogen for residential us

180、e will be taxed at the same rate as natural gas.Power capacity limitations Future power plant capacity at various stages of planning and construction is reflected in the model,with an increasing probability of being realized with the project completion status.Beyond the Sizewell-C and Hinkley Point-

181、C large-scale nuclear power plants,government will finance the construction of small modular reactors at a rate of 2 GW per decade,coming online after 2030.Existing coal-fired power generation capacity is retired by 2024.CONTENTSENERGY SUPPLYCCS&HYDROGENENERGY EXPENDITUREEMISSIONSENERGY DEMANDELECTR

182、ICITY&GAS POLICYDNV Energy Transition Outlook UK 2024There is intensifying debate around the pathway to net zero.Although the government is committed to deliver net zero by 2050,it has recently rolled back on some of its previous ambitions,stating that it is now taking a more pragmatic,proportionate

183、,and realistic approach to meeting net zero.This highlights several key challenges policy,pace of change,systems thinking,and societal engagement in transitioning the UK energy system.Policy Policy clarity,policy consistency,and policy certainty are important to provide a stable environment for inve

184、stment by companies and financial investors.There have been inconsistencies in the UK Government approach over the years.For example,the September 2023 roll-back on energy-efficiency measures,and the five-year delay on the ban of sales of new Internal Combustion Engine(ICE)cars,are detrimental to pr

185、oviding a stable investment environment and have damaged industry confidence.Well-developed policies supported by the majority of interested parties can set the pathway for the rapid transition that we need.Pace of change We are still taking an incremental approach to the energy transition rather th

186、an the transformative approach required if we are going to deliver on net zero by 2050.The government needs to be prepared to step in to provide more support to the low-carbon technologies that will shape the future UK energy system.This includes financial support and reforming the planning and perm

187、itting system which is a cause of major bottlenecks.Systems thinking The energy system is highly interconnected and changes in one element will trigger intended and unintended feedback in others.For effective imple-mentation of policy initiatives,there needs to be Current challenges to delivering on

188、 government net-zero ambition better joined-up thinking;in other words,systems thinking.For all the targets and the initiatives that the government has put forward,there needs to be a clear plan of action that considers all the stake-holders required to successfully deliver the target or initiative.

189、That includes in most cases a materials supply chain that is resourced and resilient,a skilled workforce to coordinate and install the technologies,a customer base that is primed and ready to provide the demand,and access to financing.Societal engagementPublic engagement should be at the heart of th

190、e net-zero strategy.There should be a massive campaign of education as well as broad engagement with society at large to communicate the net-zero strategy and its implications and how the government plans to make it a just transition by supporting low-income households.For example,if we take the Cli

191、mate Change Committee scenarios,over 40%of the measures to deliver on net zero require public support,whether on energy efficiency,lifestyle changes,or on modal shifts and reduction in transport.Establishing independent bodies that can provide trusted advice to people is key for the communication ca

192、mpaign.19Ramping up the pace of energy system transformation will require long-term policy consistency and extensive societal engagement.CONTENTSENERGY SUPPLYCCS&HYDROGENENERGY EXPENDITUREEMISSIONSENERGY DEMANDELECTRICITY&GAS POLICYDNV Energy Transition Outlook UK 2024Looking forward,UK demand for p

193、roducts and services will continue to expand through to mid-century but final energy demand will move in the opposite direction,declining by a quarter between 2022 and 2050.Driving the decline in energy demand is the acceleration of energy efficiencies from widespread electrification in transport,ma

194、nufacturing,and heating in buildings.We will see accelerating rates of adoption of electric road vehicles(EVs)and heat pumps for space heating in buildings.The mix of energy carriers will shift dramatically,with a two-thirds decrease in use of fossil fuels and an almost doubling in use of electricit

195、y between now and 2050.Hydrogen and its derivatives will start to make an impact after 2030,increasing to provide 8%of final energy demand by 2050.3 ENERGY DEMAND This chapter describes the demand for energy carriers within the transport,buildings,and manufacturing sectors,and for non-energy applica

196、tions such as industrial feedstocks.Final energy demand represents energy delivered to consumers,including non-energy use,but excluding the energy sectors own use and the energy lost in transformation processes such as in power stations.Energy demand tends to grow in lockstep with popu-lation growth

197、 and improvements in standards of living(as captured by GDP per capita),although that growth is reduced by improvements in energy efficiency.The UKs population is expected to increase slowly but continuously to be 8%higher in 2050 than in 2022 an annual average growth rate of 0.3%.The UK economy is

198、expected to grow at a much faster rate,with GDP per capita in 2050 being 34%higher than in 2022 an average annual growth rate of 1%.In the absence of any efficiency improvements,the combined effects of growth in population and income per capita would normally drive an increase in energy demand.Howev

199、er,an accelerated improvement in energy efficiency,primarily driven by widespread electrification,more than compensates for the growth in demand for energy services.The overall trend is for a slight increase in final energy demand up to 2026 and then a gradual decrease up to 2050.Total final energy

200、demand in 2050 is a quarter lower than today.An overview of trends in key indicators for energy demand is shown in Figure 3.1.There is an increase in the rates of change in three key indicators in the period 20222050,compared with 19902022,indicating an acceleration of the energy transition up to 20

201、50.The percentage of all final energy as electricity increases three times faster than previously;the percentage of final energy as fossil fuels decreases six times faster than previously;and final energy per capita decreases 40%faster than previously.The overall picture for the future is an acceler

202、ation of the beneficial changes that reduce energy demand and fossil-fuel use which began during 19902022.This will lead to deep transformation in energy demand and energy carriers,and carry on the decoupling of energy demand from GDP.20CONTENTSENERGY SUPPLYCCS&HYDROGENENERGY EXPENDITUREEMISSIONSENE

203、RGY DEMANDELECTRICITY&GAS POLICYDNV Energy Transition Outlook UK 2024In manufacturing,a more stable pattern of energy demand is forecasted,since industrial heat,where most manufacturing energy demand originates,is hard-to-electrify;however,a 49 TWh(19%)decrease is achieved.Figure 3.2 shows annual fi

204、nal energy demand by sector.It is notable that while buildings and transport have been consistently the two largest demand sectors and approximately equal from 1990 to 2022,after 2030 transport demand decreases much faster than for buildings.This is indicative of the more challenging nature of deman

205、d reduction in buildings compared to transport.Deployment of EVs is rela-tively straightforward compared to deployment of Final energy demand by sectorLooking at final energy demand in the three main demand sectors,of the 397 TWh decrease in final energy demand between 2022 and 2050,transport accoun

206、ts for the majority(71%)of that reduction,followed by buildings(13%),manufacturing(12%),and other/non-energy(4%).Transports huge 283 TWh(36%)reduction in annual demand is driven by a rapid electrification of road transport,achieved through the mass uptake of passenger and commercial electric vehicle

207、s(EVs).The 51 TWh(16%)reduction in buildings energy demand is driven largely by electrification of heating(principally the replacement of gas boilers by heat pumps)along with building energy performance improvements.heat pumps and building energy efficiency,which requires improving buildings that va

208、ry in age,construction materials,and ownership type.Final energy mixToday,fossil fuels still supply three-quarters of the UKs final energy demand.However,our forecast is for an increasingly fast transition away from fossil fuels and towards electrification after 2030.Figure 3.3 shows this transition

209、.By 2050 there is a complete phase-out of coal and fossil fuels share of the total is halved.Natural gas persists as the most economically viable energy carrier in various sectors,and so its 43%decline between 2022 and 2050 is slower than that of oil(at 77%).Electricity demand,on the other hand,incr

210、eases by 93%from 2022 to 2050,making it the largest energy carrier with a 45%share of the total in mid-century driven by mass electrification in transport and buildings.Biomass use also grows steadily,increasing by 46%and providing 8%of final energy in 2050.Hydrogen and derivatives(including ammonia

211、,hydrogen and e-fuels)grow quickly from negligible amounts in 2022 to 92 TWh/yr in 2050,representing 8%of total demand.Although this is a relatively small amount,these fuels are vital for those sectoral end uses that are hard-to-electrify.Oil still meets 16%of total demand in 2050,largely in transpo

212、rt and non-energy demand.21CONTENTSENERGY SUPPLYCCS&HYDROGENENERGY EXPENDITUREEMISSIONSENERGY DEMANDELECTRICITY&GAS POLICYDNV Energy Transition Outlook UK 2024structure,a wide variability in the how energy using equipment is purchased and used,and the funda-mental properties of energy conversion.A b

213、road indication of how the energy efficiency of products and services has been changing is shown in Figure 3.4.Final energy demand per capita and income per capita move in the same direction from 1990 to 2010.After that,there is a decoupling between the two.Between 2010 and 2022,despite a 12%increas

214、e in GDP per capita,there is a 17%reduction in energy demand per capita.Projections to 2050 show further steady decoupling in every year,indicating continual overall energy-efficiency improvements across the economy.Energy efficiencyEnergy efficiency is usually the most cost-effective means of reduc

215、ing energy demand and should be top of the list when authorities and companies consider emission mitigation options.Efficiency can be improved through a variety of measures,including electrification(due to improved conversion efficiency),improving insulation in buildings and their operation to reduc

216、e energy waste;improving the provision of public transport options;and improving the efficiency of freight logistics.The total potential for demand savings from energy efficiency is limited by many factors,including the need to transform legacy infra-Stagecoach electric bus operating a park and ride

217、 bus service in Cambridge,England.22CONTENTSENERGY SUPPLYCCS&HYDROGENENERGY EXPENDITUREEMISSIONSENERGY DEMANDELECTRICITY&GAS POLICYDNV Energy Transition Outlook UK 2024Transport accounted for 42%of the UKs energy demand in 2022.Between 1990 and 2022,transport energy demand peaked in 2007,with demand

218、 in 2022 about an eighth(13%)lower than the 2007 peak.We forecast that because of significant improvements in energy efficiency,particularly in the road transport subsector,transport energy demand will decline by 36%between 2022 and 2050.These numbers include the UKs estimated share in international

219、 aviation and shipping.There are five transport subsectors:road,aviation,maritime,rail,and pipelines.Road,aviation,and suitability for powering vehicles and the current dominance of oil-fuelled vehicles in the UK fleet of vehicles on the road.Oil in its various forms has a highly beneficial combinat

220、ion of volumetric and gravi-metric energy density that provides more energy per kilogram compared to other non-electricity carriers in transport.It is also stable,easily transportable,and does not have to be produced from feedstocks but comes ready-made.Despite the benefits of the incumbent dominant

221、 fuel,market changes mean that the period 2022 to 2050 will see a revolution in energy carriers for transport.Figure 3.6 shows future changes in transport carriers.Oil use declines 80%between 2022 and 2050,and maritime combined currently account for 94%of transport energy demand and thus are our key

222、 focus areas in this section.Figure 3.5 shows that between 2022 and 2050,aviation demand is fairly constant,and so the rapid decrease in road transport energy demand means that by 2050 demand in road and aviation are fairly close in size.In terms of energy carriers for transport,todays mix is comple

223、tely dominated by oil and natural gas,which together make up 96%of final transport energy demand.Going forward,this dominance will disappear but they will still constitute 32%of transport energy demand in 2050.The phase-out of oil in transport is difficult partly due to its particular natural gas us

224、e by 46%.The largest change will be a 17-fold increase in electricity between 2022 and 2050,to end up representing 36%of transport demand by 2050.Biomass use doubles,representing 14%of transport demand by 2050.From negligible amounts in 2022,hydrogen and its derivatives will grow to be 19%of demand(

225、as ammonia(6%),e-fuels(8%),and hydrogen(5%);this this will require rapid development of new infrastructure and supply chains to produce and distribute these fuels and since they cannot replace oil in a like-for-like way in most vehicles there will need to be associated changes to or replacement of v

226、ehicles.3.1.1 Road transportRoad transport includes two subsectors passenger road vehicles(all vehicles with between three and eight passenger seats,including most taxis),and commercial vehicles(all other vehicles,including light duty vehicles,heavy duty vehicles,public service vehicles).Two key fac

227、tors drive energy demand for road transport:total vehicle-km(vkm)travelled and the average energy intensity of vkm travelled.Average fleet energy intensity is determined by the mix of vehicles on the road and their energy efficiency,how they are driven,and how far different types of vehicles are dri

228、ven each year.Travel demand for road transport is expected to increase steadily from now to 2050(DfT,2022).The Department for Transport(DfT)defines eight scenarios for the future of road transport.All show increasing annual miles travelled,with the growth between 2015 and 2050 ranging from 5%(behavi

229、oural 3.1 Transport energy demand 23CONTENTSENERGY SUPPLYCCS&HYDROGENENERGY EXPENDITUREEMISSIONSENERGY DEMANDELECTRICITY&GAS POLICYDNV Energy Transition Outlook UK 2024change scenario)to 56%(technology scenario),and 29%in the core scenario.In the ETO,road miles increase at a similar rate to the DfTs

230、 core scenario,rising by 22%between 2015 and 2050.Figure 3.7 shows that total energy demand for road transport will decline steeply after 2022,by 52%for commercial road travel,70%for passenger,and by 64%overall.Passenger transport currently represents two-thirds of energy demand,but this share will

231、fall to just over half by 2050 due to faster electrification of cars than commercial vehicles.Energy demand in passenger and commercial subsectors become approximately equal by 2050.the phase-out of ICEVs as new car sales.In our 2022 ETO,sales of ICEVs declined to 42%of total annual sales by 2025,wh

232、ereas we now see that share at 65%in 2025(62%of passenger and 92%of commercial sales).Despite this delay,the outlook is still for a rapid phase-out of the purchase of ICEVs after 2030 as up-front EV costs continue to decline,charging infra-structure becomes more reliable and available,and the TCO ad

233、vantages become clearer to consumers.Figure 3.8 shows the share of ICEVs in new vehicle sales declining to 15%by 2030 and to 1%by 2035.Commercial vehicle sales are much slower to with 47%as ICEVs in 2030,and 10%after 2040.Approximately Vehicle salesToday,internal combustion engine vehicles(ICEVs)dom

234、inate passenger new vehicle sales,holding an 80%market share.There are several reasons for the slower than expected market transformation in new vehicles,despite EVs typically consuming less than a third of the energy of ICEVs per km and costing less to maintain(Consumer Reports,2020).Firstly,buyers

235、 often focus on purchase price when making vehicle choices and EVs are still more expensive to buy than ICEVs the so-called up-front cost barrier although on a total cost of ownership basis both passenger and commercial EVs are already close to or even cheaper than their ICEV equivalents.Secondly,th

236、e UKs EV charging network is not growing as fast as the rate of EV ownership,and the strain on the existing charging network has been growing.The Public Charge Point Regulations 2023 of November 2023(Gov.UK,2023b)should ensure consistent and positive experiences for people using public charging poin

237、ts.For example,all motorway service stations are now expected to have at least six high-speed EV public chargers,compared to only 23%of the UKs 119 motorway service stations today(What Car?,2023).Thirdly,supply-chain constraints are another hurdle,with lead times for EV purchases longer than for ICE

238、Vs.Since the previous ETO update,the government delayed the deadline for the phase-out of new ICEVs from 2030 to 2035.The change was greeted with disappointment by the vehicle industry,who have been preparing for imminent market transformation.In the short term,this regulatory change will slow 98%of

239、 all vehicle sales will be battery electric vehicles(BEVs),plug-in hybrid electric vehicles(PHEVs)or fuel cell electric vehicles(FCEVs)by 2040.Thus,in the long term the governments change in the year of phasing out ICEVs makes little practical difference,given manufacturers commitments and the falli

240、ng cost of EVs.24CONTENTSENERGY SUPPLYCCS&HYDROGENENERGY EXPENDITUREEMISSIONSENERGY DEMANDELECTRICITY&GAS POLICYDNV Energy Transition Outlook UK 2024In 2023,the UK electric vehicle(EV)market experienced sustained momentum in vehicle electrification.The average quarterly sales of plug-in hybrid and b

241、attery electric vehicles in the passenger segment for 2023 were circa 20%higher than the quarterly average vehicle sales in 2022.Notably,sales in the bus segment in the first half of 2023 matched those throughout the entire previous year.Despite the inflationary environment and the shift in the UK G

242、overnments stance on the ban of zero-emission vehicles from 2035 instead of 2030,the growth in plug-in vehicle sales suggests that the market remains driven by customer demand and by the commitment of the commercial segment to reduce carbon emissions.For the automotive industry in the UK,the directi

243、on is clear,and manufacturers are scaling up and adapting facilities to rapidly transition to battery-electric vehicles(BEVs).This transition is supported by recent announce-ments of additional investments by the automotive original equipment manufacturers(OEMs),with new investment commitments total

244、ling up to GBP 2 billion for EV production by a leading OEM.To accommodate the increase in the EV demand and ensure reliable domestic supply chain of key components and raw materials,such as battery cells,the UK government has announced investments of over 2 billion GBP in new capital and R&D fundin

245、g to support the development and manufacturing of zero-emission vehicles,their batteries,and the supply chain until 2030 as part of the UK Battery Strategy.Additionally,the Tata Group has committed invest-ments totaling GBP 4 billion,for the establishment of a 40 GWh battery gigafactory in Somerset,

246、UK.From DNVs work supporting investors in the sector,we observe a growing interest in battery manufacturing across Europe,where the continued development of innovative battery technology,the scale of facilities,and low-carbon production processes are becoming increasingly important.With an ever-grow

247、ing portion of the vehicle fleet transitioning to EVs,the demand for and deployment of charging infrastructure has increased significantly.This growth has contributed to reduced concerns around the range of EVs.Not only has the number of EV charging stations increased,but DNV has observed that the t

248、echnology of the charging infrastructure has matured.Newer stations feature scalable and modular construction,leading to improved uptime and,consequently,the reliability of the overall charging infrastructure across the country The improvements in charging infrastructure have been largely enabled by

249、 developments in battery technology,such as 800V architecture,higher energy densities,and faster charging capabilities.These advancements allow EVs to absorb more energy from the chargers,further enhancing the efficiency and reducing time associated with the charging process.Despite the improvements

250、 in charging speed,DNV expects most charging to take place at home due to the higher cost associated with public charging stations.For heavy-duty vehicles and ferries,the power range extends to megawatts(MW),with ferries capable of charging at 10 MW.From a strategic perspective,EVs play a crucial ro

251、le in the energy transition.They are poised to significantly reduce transport costs,GHG emissions,and air pollution,while simultaneously improving grid reliability.The fact that GHG emissions from EVs are three to four times lower than internal combustion engine vehicles(ICEVs),depending on the use-

252、case,contributes to these positive outcomes.The flexibility inherent in EVs also facilitates their seamless integration,as well as that of renewables,into the broader energy system.These advantages stem from substantial investment directed toward EVs and charging infrastructure,and cater to the grow

253、th of the holistic sustainable transport ecosystem.Leading the charge:EVs in the UK25CONTENTSENERGY SUPPLYCCS&HYDROGENENERGY EXPENDITUREEMISSIONSENERGY DEMANDELECTRICITY&GAS POLICYDNV Energy Transition Outlook UK 2024affect the mix of vehicles on the roads.The rate of fleet transformation is depende

254、nt on the number of vehicles replaced each year,which is not expected to change significantly.ICEVs remain the majority of passenger cars in the passenger road fleet until 2034(Figure 3.9)and the majority of the commercial road fleet(Figure 3.10)until 2040.The total number of vehicles will remain fa

255、irly stable after 2022,with 37 million passenger vehicles and 6 million commercial vehicles.Vehicle fleetWhile the number of vehicles per capita increased considerably between 1990 and 2022 by 43%for passenger and 46%for commercial we expect this trend to change going forward.The total number of veh

256、icles will remain fairly stable after 2022,with 37 million passenger vehicles and 6 million commercial vehicles on the road.Several innovations can improve the efficiency with which vehicles are used and reduce the number of vehicles that need to be in use,such as car sharing,ridesharing,improving f

257、reight logistics,and modal shifts from private to public or active travel.Today,ICEVs make up 98%of existing UK vehicle stocks.The changes in types of vehicles being sold,shown in Figure 3.8,will take some time to significantly 3.1.2 AviationDemand for air travel in the UK has risen strongly in rece

258、nt decades and is expected to continue growing although there has been some dampening of demand for business travel since the COVID-19 pandemic with a shift towards virtual meetings and events.Trends for increasing leisure travel,on the other hand,are expected to remain unchanged.Passenger flights p

259、er capita increased from 0.8 to 1.8 between 1990 and 2022,with a further doubling of per capita airline journeys expected by 2050.Aviation energy demand in the UK peaked in 2006/2007 at 160 TWh/yr and since then,despite increases in passenger journeys,energy demand has remained around 145 TWh/yr and

260、 is projected to stay at this level up to 2050.This levelling of energy demand has been achieved by continual improve-ments in aviation energy efficiency.The aircraft and airline industries have been driving this through interventions including increasing load factors,lightweighting aircraft,improvi

261、ng the efficiency of propulsion,and improving aircraft aerodynamics.In future,electrification of a share of the fleet covering short-haul flights will also contribute to energy-efficiency improvements.Figure 3.11 shows developments in the energy mix for aviation.Until now,all the energy demand for a

262、viation has been met by oil-based fuels.Over the next three decades,the share of petroleum-based aviation fuel is expected to decline to 53%of the energy mix by 2050.Electric aircraft will be limited to short-haul domestic and international flights.For medium to long-haul flights,decarbonization pro

263、gress is achieved with the introduction first of bioenergy(the worlds first transatlantic flight running on biofuels happened in November 2023(Virgin Atlantic,2023),then synthetic e-fuels(such as e-kerosene),electricity growing after 2030,and hydrogen being introduced in the early 2040s.There is sti

264、ll significant uncertainty around which fuels will dominate aviation energy in future,as the available alternatives are currently fairly evenly poised in terms of cost and availability.Our Outlook shows that by 2050 non-oil energy carriers will provide the following share of carriers:biofuel blends(

265、23%),synthetic e-fuels(15%),hydrogen(5%),and electricity(4%).26CONTENTSENERGY SUPPLYCCS&HYDROGENENERGY EXPENDITUREEMISSIONSENERGY DEMANDELECTRICITY&GAS POLICYDNV Energy Transition Outlook UK 2024Energy efficiency is reliant on improvements to vessels such as adding wind-assisted propulsion and incre

266、asing ship utilization rates.Fuel switching also contributes to energy efficiency.Short-sea shipping and local ferries could use a combination of electric shore power with electric propulsion.The introduction of new fuels has already started,with the use of biofuels and natural gas.Use of electricit

267、y and e-fuels will start growing in the mid-2020s,with ammonia starting to be adopted by 2030.The maritime energy mix will be a lot more varied by 2050(Figure 3.12)and consist of 36%ammonia,25%bioenergy,19%synthetic e-fuels,and the remaining share made up of oil,natural gas,and electricity.The marit

268、ime energy mix will be a lot more varied by 2050,dominated by 36%ammonia,25%bioenergy and 19%synthetic e-fuels.3.1.3 MaritimeMaritime is the most energy-efficient mode of trans-porting freight,especially over long distances,in terms of energy used per tonne-mile.It represented 12%of UK transport ene

269、rgy demand in 2022.Maritime energy demand comes from vessels on the UKs inland waterways and on international routes,and demand from international ships bunkering in UK ports.In 2021,85%of maritime energy demand went into international marine bunkers.Maritime energy demand is expected to peak by 203

270、0(at 10%above todays level)and decline slowly afterwards due to energy-efficiency improvements.By 2050,we expect UK maritime energy demand to be 15%less than today.27CONTENTSENERGY SUPPLYCCS&HYDROGENENERGY EXPENDITUREEMISSIONSENERGY DEMANDELECTRICITY&GAS POLICYDNV Energy Transition Outlook UK 2024Bu

271、ildings energy demand by end useWe model buildings energy demand broken down into five end uses:space heating,water heating,appliances and lighting,cooking,and space cooling.Today,space heating,water heating,and appliances and lighting make up 95%of energy demand in buildings,and so these are our fo

272、cus for this section.The lions share of buildings energy demand is for space heating,which is about half of the total today but due to decline to a third of the total by 2050(Figure 3.14).Energy demand for space and water heating was relatively stable between 1990 and 2022,while demand for appliance

273、s and Overall,the trend since 1990 has been for the energy intensity of buildings to decrease,in terms of total energy demand per square meter of building.This indicates an overall improvement in the energy efficiency of buildings.Despite a 30%increase in residential buildings floor area between 199

274、0 and 2022,energy demand decreased by 14%,and there was a similar efficiency improvement in commercial buildings.Our forecast sees this beneficial trend continuing up to 2050 at about the same pace,with a 30%decrease in the energy intensity of all buildings between now and 2050.In terms of the energ

275、y mix,we are going to see a notable transition towards electrification of heating in buildings,leading to a 44%increase in buildings electricity demand between now and 2050,growing its share of the energy mix from 32%now to 51%in 2050.At the same time,natural gass share of buildings energy demand wi

276、ll decline from 56%today to 45%in 2050.Other carriers oil,biomass,direct heat represent only 13%of the total energy demand today,falling to 5%in 2050(Figure 3.13).Despite much discussion around hydrogen replacing natural gas in buildings,we currently do not foresee this happening on a large scale.It

277、 will provide just 2.2 TWh/yr by mid-century,blended into the gas grid.This limited uptake is primarily due to the substantial price difference,where we foresee that,even in 2050,hydrogen will be twice as expensive as natural gas.Therefore,until further clarity(expected only in 2026)is provided by t

278、he government on hydrogen for heating as well as on plans for the required infra-structure build-out,our cost and efficiency-based model gives very little hydrogen use in buildings.lighting increased by 20%.Appliances and lighting continue their incrementally increasing trend in future,although at a

279、 slower pace,increasing by 23%by 2050 compared to 2022,while space and water heating demand will decline by 37%and 12%,respectively.3.2.1 Space heating Space heating technologies are currently domi-nated by natural gas boilers,which provide heating for 84%of UK households.Going forward,however,we ar

280、e set to witness a strong trend in electrification of space heat,predominately with heat pumps.Heat pump uptake in buildings will only really take off,however,after 2030,heating 20%of homes by 2040 Buildings account for about 35%of UK final energy demand,consuming 550 TWh/yr,making it the second big

281、gest end-use sector after transport.Across all UK buildings,residential buildings accounted for 68%of total building demand in 2022,and this will fall slightly to 63%by 2050.Total buildings energy demand peaked in 2004.Almost half of buildings energy demand is used for heating.Drivers of energy dema

282、nd in buildings include energy efficiency,floor area,heating technology and fuel,the energy behaviour of building users,energy-using equipment,and type of building.Similar to transport,rising population and income levels are likely to drive up demand for energy services in buildings in the future,wh

283、ich would normally lead to increasing energy demand.However,the expected increase in energy demand will be counteracted by improving efficiencies in buildings,appliances,and heating,and in the longer-term by a reduction in heating degree days due to increased global warming.3.2 Buildings energy dema

284、nd 28CONTENTSENERGY SUPPLYCCS&HYDROGENENERGY EXPENDITUREEMISSIONSENERGY DEMANDELECTRICITY&GAS POLICYDNV Energy Transition Outlook UK 2024the energy mix for water heating,the overall picture is similar to space heating in that the share of energy as fossil fuels today,predominately natural gas,will d

285、ecrease and give way to increasing amounts of electricity for which the share will increase three-fold.The share of final energy demand as fossil fuels will fall from 89%today to 65%by 2050,while electricitys share will increase from 6%to 28%,with bioenergy(6%)and hydrogen(1%)making up the remainder

286、.3.2.3 Appliances and lighting The appliances and lighting segment encom-passes all electrical devices not used for heating or cooking from lamps to computers,refrigeration units,ventilation fans,and clothes dryers.Historical evidence suggests that in general,as GDP per capita increases,demand for u

287、se of appliances and lighting also increases across the economy.Between 1990 and 2022,residential demand for appliances and lighting grew by 5%and commercial demand grew by 40%-in line with the growth in buildings floor area in residential(29%)and commercial(68%)buildings during this time.Both resid

288、ential and commercial energy demand for appliances and lighting peaked around 2005 and decreased up to 2022,largely due to improvements in the energy efficiency of end-use equipment.However,we forecast that these energy demand reductions will be overcome in future by stronger increases in the demand

289、 for electric appliances.We expect about a quarter increase in energy demand for appliances and lighting between now and 2050.decline to just below 80%,while electricity will increase to 14%of heating energy.Note that due to the much higher efficiency of heat pumps(in the order of 300%),electricity

290、will serve to heat a much larger(35%)share of homes.The rest of the energy mix will be as direct heat(5%by 2050)and very small amounts of biomass and hydrogen(approximately 1%each by 2050).3.22 Water heatingEnergy demand for water heating remained fairly stable from 1990 to 2022,with demand being 12

291、1 TWh today.We expect it to decline by 15%between 2022 and 2050 thanks to more efficient water heaters and electrification of water heating.With regards to natural gas energy price hike in 2022,due to the war in Ukraine.In the near term,we expect demand for space heating to rebound from 258 TWh to 2

292、84 TWh in 2026.After that,we expect it to decline slowly towards 187 TWh by 2050 thanks to a combination of electrification,better equipment efficiency,and improved building efficiency.Figure 3.16 shows that today,92%of final energy demand for space heating is provided by fossil fuels(almost all as

293、natural gas,oil,and coal),while electricity holds a very small(3%)share of the total.By 2050 the dominance of fossil fuels will be less pronounced but still in place.Fossil fuels share of energy demand for space heating in 2050 will and 38%by 2050(Figure 3.15).System inertia limits the speed of roll

294、-out of heat pumps in the UK,as further detailed in the pop-out box.In future,we expect an increasing share of new boilers being installed to be hydrogen-ready,as the technology exists and is not expected to cost much more than regular gas boilers.To what extent this hydrogen readiness will be used

295、is highly uncertain.There remains a very high cost penalty for switching from natural gas to hydrogen as a fuel,and whether there will be sufficient dedicated supply of hydrogen at the scale needed for expanding its use in building heating is uncertain at this time.Space heating energy demand was su

296、ppressed somewhat during and shortly after the electricity and 29CONTENTSENERGY SUPPLYCCS&HYDROGENENERGY EXPENDITUREEMISSIONSENERGY DEMANDELECTRICITY&GAS POLICYDNV Energy Transition Outlook UK 2024Decarbonizing buildings heating and system inertia Decarbonizing energy use in buildings is one of the

297、most significant challenges facing the delivery of net zero in the UK.Today,85%of the UK housing stock,representing over 24 million homes,is heated by natural gas boilers.This accounts for 17%of UK CO2 emissions,approximately 77 MtCO2e.The first challenge to address in domestic heat is to reduce dem

298、and.Improving levels of insulation in UK housing is critical to both reducing demand and protecting those living in fuel poverty.However,of the UKs current housing stock,around half has an effi-ciency rating of EPC D or worse.The government has set a target to upgrade existing houses to EPC bands B

299、and C by 2035,and for all newbuilds from 2025 to meet higher efficiency standards according to a new Standard Assessment Procedure(BRE,2023).The second challenge relates to the decision on which heating technology to use to replace natural gas boilers.Realistically,there are two options for deployme

300、nt at scale,hydrogen boilers or heat pumps,though district heating solutions may also be used in certain places.Heat pumps have the advantage of high levels of efficiency compared with a gas boiler.A typical Coefficient of Performance(CoP)for a heat pump is higher than 3,meaning that for every 1kW o

301、f electricity used,over 3 kW of heat can be produced.The equivalent hydrogen boiler would only have a CoP of about 1.The infographic on the opposite page compares the efficiency of different space heating technologies while taking into account various efficiencies,conversions,and losses over the val

302、ue chain.As can be seen,for every 100 units of primary energy supplied,a heating system based on a future green hydrogen grid can deliver roughly 60 units of useful energy to the end user.In comparison,a heating system relying on much more efficient heat pumps can raise the useful energy delivered t

303、o 177 units,considering the UKs current power generation mix.By 2050,with the significantly larger share of more efficient renewables in the power generation mix and with a slightly higher average coefficient of performance for heat pumps,useful space heating energy delivered could be raised further

304、,up to 259 units,which is over four times higher than a green hydrogen-based system.However,efficiency is not the only factor that consumers focus on;they are also concerned about upfront costs,running costs,levels of disruption and changes to their lifestyle.Currently,the capital costs for a heat p

305、ump are three to four times more than the cost of an equivalent gas boiler.To make a heat pump work effectively in homes,an EPC rating of C or higher is needed,requiring additional investment *COP=Coefficient of performanceUK SPACE HEATING30CONTENTSENERGY SUPPLYCCS&HYDROGENENERGY EXPENDITUREEMISSION

306、SENERGY DEMANDELECTRICITY&GAS POLICYDNV Energy Transition Outlook UK 2024Primary energy sourceEnergy carrierEnergy serviceUsefulenergyprovidedUseful heatRenewable electricity100%ElectrolysisBoilerHydrogen 60%TransformationHeating technology100%Useful heatNatural gasBoiler89%10%Losses1%Transportation

307、 losses9%Transportation lossesUK Power generation mix 2022100%Useful heatPower generationGrid electricity177%39%lossesFossil,nuclear,biomassAmbient heatHeat pump (Avg COP*)3.2Renewable electricity100%Useful heatPower generation Heat pump (2050 Avg COP*)3.4Grid electricity258%16%lossesRenewable elect

308、ricityFossil,nuclear,biomassAmbient heat9%Transportation lossesUK Power generation mix 205033%losses1%Transportation losses10%LossesOur forecast gives results which are more conserv-ative than other major scenarios in the UK energy industry.For example,the figure below compares cumulative heat pump

309、uptake in the ETO versus the range of Future Energy Scenarios(FES)2023.FES are published annually by the National Grid Electricity System Operator(NG ESO)and are widely used as a basis for UKs energy infrastructure planning.FES consist of three Net-Zero-compliant scenarios and a non-Net Zero scenari

310、o(Falling Short).The graph shows that in our forecast heat pump uptake is slower than all Future Energy Scenarios.Even the conservative ETO cumulative uptake graph shown above entails an exponential rise in annual sales of heat pumps from only about 60,000 per year today to over 250,000 in 5 years t

311、ime.In the UK,natural gas is nearly 30%cheaper than the European average,while electricity prices are similarly high.Currently,use of natural gas for home heating does not incur a carbon tax.This effectively subsidizes natural gas versus low-carbon energy vectors,and gives further competitive advant

312、age to gas boilers versus heat pumps.On top of that,based on data from DESNZ on household insulation(DESNZ,2023a),currently only about half of the UK housing stock is well-insulated enough to be suitable for fitting a heat pump.The efficiency of heat pumps drops notably in poorly insulated homes,mak

313、ing them impractical and/or uneconomical in such cases.Furthermore,electricity grid constraints and delays involved in the expansion of grid infrastructure are other hurdles to achieving the rising pace of heat pump uptake typically foreseen in Net Zero scenarios.When considering running costs,the c

314、ost of electricity per kWh in the UK is currently four or five times as much as for natural gas,negating the efficiency savings of a heat pump at least for now.In the longer term,a higher penetration of renewables will see electricity prices reduce.The cost of hydrogen will probably be more than the

315、 cost of natural gas,but that is not yet clear,and we await clarity on the hydrogen production business models to help understand the price point.Gas boilers typically last around 15 years,and today we are still adding around 1.7 million gas boilers every year,which will remain in the system for ano

316、ther 15 years unless targeted and costly government intervention programmes are intro-duced.This introduces new inertia in the system,which will inevitably slow the energy transition in the medium term.As things stand today,full decarbonization of buildings heating via heat pumps seems extremely unl

317、ikely to happen by 2050.If that target is to be reached,as shown in our Common Planning Pathway project report(DNV,2023b),hydrogen will need to play a role in providing heat for a share of households.The other challenge is the scale and speed of conversion.Currently,the government prefers a consumer

318、-led transition,with homeowners choosing which solution to use to decarbonize their heating.However,recent experience with government schemes to promote heat decarbonization has not been encouraging.The 2012 Green Deal was scrapped in 2015 with just 15,000 loans having been taken out(versus the 14 m

319、illion by 2020 originally targeted),and the Green Homes Grant was scrapped early with less than 2%of the GBP 1.5 billion earmarked for the scheme having been allocated in 202021.The current Boiler Upgrade Scheme,launched in 2022,is also showing low levels of uptake.DNV believes that a consumer-led t

320、ransition is unlikely to achieve the speed of conversion necessary to decarbonize domestic heating and will cause significant transition planning problems for both the electricity and gas network operators.At the same time,stronger policy support for heat pumps(e.g.incentivizing electricity over nat

321、ural gas use via reallocation of taxes,including the carbon tax),and clear direction on hydrogen for heating are needed.Importantly,these need to be accompanied by much stronger action on insulation retrofitting of existing poorly insulated buildings which,besides enabling faster uptake of heat pump

322、s,reduces heating energy demand via improved building stock efficiency.As the saying goes,the greenest energy is the energy we dont use.in insulation.A heat pump may also require larger radiators and changes to pipework to account for the lower flow temperatures it achieves.In terms of heat pump upt

323、ake,system inertia is likely to constrain the rate of uptake.In our forecast,only about 12 million(or 38%of)households will be heated by heat pumps by 2050.In terms of annual uptake,with a forecast of about 300,000 installations in 2028,we expect to fall short of the government target of 600,000 ins

324、tallations in that year,which we only expect to be reached about 10 years from now.31CONTENTSENERGY SUPPLYCCS&HYDROGENENERGY EXPENDITUREEMISSIONSENERGY DEMANDELECTRICITY&GAS POLICYDNV Energy Transition Outlook UK 2024Energy demand in this subsector is expected to remain relatively stable,with a smal

325、l decrease from 46 TWh/yr today to 42 TWh/yr by 2050,with its share of total manufacturing energy staying at 20%in mid-century.Iron and steel:production of about seven million tonnes of steel annually,contributing around GBP 2.4bn to the UK economy per year.Owing to high overhead costs and a lack of

326、 competitiveness in the international market,the UK steel industry has been in decline over recent decades.However,the government is committed to keeping this vital industry alive through,for instance,a public procurement policy(House of Commons,2021)and recent investment in greener steelmaking at P

327、ort Talbot(Gov.UK,2023c).Iron and steel production,which currently consumes around 30 TWh/yr,is expected to reduce its demand by 55%to 14 TWh/yr by 2050.Construction and mining:construction of roads,buildings,and other infrastructure,and mining of minerals.This subsector contributes around GBP 151bn

328、 per year to the UK economy with most of that being produced by the construction industry.Despite a growing economy and therefore an expected increase in activity in this subsector,we expect its energy demand to almost halve from 20 TWh/yr today to 11 TWh/yr by 2050.About 82%of energy demand in this

329、 subsector is used to produce heat(e.g.to produce asphalt),with the remainder split equally between running onsite vehicles and other machines.There is scope for improving the demand will be slower in future compared to the last few decades.This indicates that most of the major structural and manufa

330、cturing technology changes that were possible have already been implemented,and that further changes will be more focused on fuel switching and electrification.By 2050,the manu-facturing sector will represent a slightly greater share of total UK energy demand than it does now,going from 15%to 17%,du

331、e to other sectors decreasing their energy demand faster.3.3.1 Manufacturing subsectorsWe divide manufacturing into seven subsectors.Manufactured goods:the production of general consumer goods,food and tobacco,electronics,appliances,machinery,textiles,leather,vehicles and other transport equipment.T

332、his subsector accounts for the largest share(45%)of total energy demand.The main reduction in manufacturing energy demand also comes from this subsector,which will require 17%less energy in 2050(96 TWh/yr)compared with today(115 TWh/yr),thanks to efficiency improvements.In this subsector,temperature

333、 ranges are low enough in some of the industries(e.g.food or textile production),which enables at least a partial switch to highly effi-cient heat pumps for industrial heat.Base materials:the production of non-metallic minerals except cement and non-ferrous mate-rials such as aluminium,and wood and its products including paper,pulp,and print.This is the second largest subsector in terms of energy