CCA at 10 - 'The electricity grid boss' - Views from Steve Holliday FEI

To coincide with the tenth anniversary of the Climate Change Act receiving Royal Assent in the UK in November 2008, the Energy Institute convened a ‘virtual panel’ of ten figures who were in leading positions at the time - six of them now Fellows of the EI - to reflect on how it came to pass, what it has meant for the UK and the prospects for the future. The result, part of the EI Views series, is a social history from diverse perspectives of one of the most ground-breaking pieces of environmental legislation of its day.

The following is the individual perspective of Steve Holliday FEI, who in 2008 was Chief Executive of National Grid and is now President Elect of the Energy Institute.

Reflections on 2008

1. How significant was the passing of the Climate Change Act in your view, and why? 

Hugely. I don’t think people appreciated at the time how significant. What set it apart was the enshrining of targets - not just aspirations - that stretch into future parliaments. Crucially - and unusually - it expressly sets out to bind the hands of future governments. 

The architecture that underpins the target - the Committee on Climate Change sitting outside of government, the carbon budgets holding successive governments to account - that’s all worked extremely well. This is a great example of government doing what it should do - setting the visionary overarching objectives, within which industry and others can act.

The Act continues to create the right set of questions, driving action towards that 80% cut in emissions in 2050. Let’s not forget - none of us who were around at the time of its introduction will be involved by 2050. It’ll be our children and their children finishing off the job - and reaping the ultimate benefit of averting the worst impacts of climate change.

2. What were the factors that led to its overwhelming adoption by Parliament? Did parliamentarians fully understand its implications?

Looking back I think it was the right act, in the right place, at the right time. 

Climate change was the zeitgeist in 2008. Labour in government and the Conservatives in opposition were clearly under pressure to out-green each other. It had overwhelming support in Parliament - I think only a handful of MPs voted against it - but I’m not sure parliamentarians fully understood the full implications and the detail. I think that reflects the fact this was so high on the public’s agenda. The public were more politically atuned on the issue than has probably been the case since.

In fact, I wonder whether the Act would have had the fair wind it did even a few months later, when the worst of the financial crises really hit, and when so-called ‘climategate’ erupted in the headlines in the run up to Copenhagen.

3. Did you have any misgivings at the time? Either about the level of the 2050 target or the framework or process designed to achieve it?

Not misgivings but it was pretty clear that the 2050 target was going to require radical change from business-as-usual for our energy system and wider economy.

I recall sitting down with colleagues at National Grid working through the implications – not least for our own operations and to set ourselves our own targets. It was clear from the graphs and the cost curves, and looking at the options available, that the first set of actions to meet the early targets weren’t that difficult. You could see your way through to 2030. But beyond that it gets really really tough. We’ll need a real step change to get the rest of the way. That’s the reality.

I like the granularity provided by the 5 years carbon budgets which break the big target down into manageable chunks, sending signals far enough in advance for businesses like mine at the time to invest. That aspect of the architecture is superb.

The view from 2018

4. Marks out of ten please! Ten years on, has the CCA lived up to its ambition? Has decarbonisation to date progressed as you expected? Where have we been successful and where is progress disappointing?

For electricity - 10 out of 10 - thus far. The sequencing has been right. I always thought electricity could and would move ahead first and fastest. It was accepted it was the biggest contributor - in particular as the enabler of decarbonisation elsewhere in the economy. 

Getting the carbon intensity of the grid down was really important. There was no point racing ahead to put electric vehicles on the road if they were being recharged by inefficient, polluting coal fired power stations. That would just shift the problem from the exhaust pipe to the power plant. In some ways we were lucky - lots of very old coal fired power plant needed replacing and so that investment needed making anyway. But choices were also made along the way that have been the makings of a great success story. Getting coal off the system sooner than would otherwise be the case and subsidising solar and offshore wind for instance. 

In hindsight, that support was probably a bit generous. But remember these were relatively infant technologies and the right decision was made to pump prime the market to bring costs down. And by god it worked. Solar and onshore wind are now close to grid parity and it’s been possible to scale back the subsidies. Even on offshore wind I recall back then we were talking about £135/MWh. The latest auction came in at less than £60! And the same story ought in future to be true for CCS, where the costs need driving down.

Last year 50% of the UK’s electricity was low carbon - taking into account all the renewables and nuclear. That’s a major, major achievement about which successive government should be proud. But we need to fully decarbonise the grid as we transfer transport and a lot of heat onto electricity.

On transport I think we’re still in the foothills, but in the last few months the signals coming out of Whitehall about phasing out petrol and diesel engines and rolling out recharging infrastructure have been encouraging. So a solid 6 out of 10 for transport.

But efforts so far on heat gets a 3 from me. I don’t think many people would disagree on that.

5. How strongly has the Climate Change Act influenced changes in behaviour and decision making by government, industry and consumers? 

For those sitting in Whitehall, it’s the shadow that sits behind every decision on energy policy now, and it’s the shadow increasingly sitting behind our policy on transportation. It sets the minimum threshold for future governments. It would be embarrassing - and challengeable in the courts - for a government to miss a legally binding carbon target. But of course the Act doesn’t preclude a government wanting to be more aggressive, to go over and above. And that might be needed once the implications of the IPCC’s 1.5C report are fully worked through.

6. To what extent has the UK maintained its position as a global climate leader since the Act was set?

The Climate Change Act is and has always been as a model internationally. In wider terms, balancing sustainability with security and affordability, the UK has tended to perform well relative to international benchmarks. It’s never fallen further than number 11 in the World Energy Council’s energy trilemma league table, and in fact usually been in the top 5 compared to other countries. Only by leading by example can Britain hope to negotiate on the international stage to persuade and cajole other countries to do more on climate change. Adopting a lowest common denominator position would be ill-advised for an advanced economy like ours.

It’s interesting now seeing growth economies like China - which we used to assume were hurtling headlong towards coal - have now been motivated by air quality concerns to take a lead in clean energy like solar.

The UK needs to keep its eye on the commercial advantage inherent in taking a lead on climate change and grabbing market share in new clean energy technologies. The scale of the opportunity available to us is as yet unproven but I believe it’s there.

Lessons for 2028 and beyond

7. As the carbon budgets tighten and the ‘lower-hanging fruit’ of easier emissions reduction measures run out, how can popular buy-in to the Climate Change Act’s goals be maintained?

I think government - this one and future governments - should hold its nerve. They should be brave and - above all - honest with the public.

There’s a cost to protecting our climate and there should be greater transparency around that. Government should tell consumers why it’s important and be transparent around the amount of subsidy required as well as when that subsidy can be pared back as technology costs fall. These subsidies could be met through taxation, but actually I think it’s right to do it through energy bills as that can play a part in driving down consumption.

8. Is the Climate Change Act consistent with the Paris Agreement? In the context of 1.5C, should we be increasing ambition to net-zero emissions by 2050? And what about accounting for emissions from sources with less clear jurisdiction (aviation, imports, etc.)? 

If we look at the science - and the IPCC’s recent report on 1.5C - I suspect the UK’s current target for 2050 is not enough. Ministers need to seek advice on the implications over and above current efforts before taking a view. The existing target is tough, and I think we need to accelerate on that to get on a better trajectory, so perhaps tightening it will focus minds even more on the task in hand.

9. How could Brexit affect the UK’s continued progress towards its CCA targets?

I don’t think it will have a huge impact, so long as the UK maintains a close relationship involving participation in common arrangements for trading in electricity, gas and emission permits.

Although the UK is currently part of the EU ‘bloc’ when it comes to targets in the Paris Agreement, our contribution stands clearly in isolation too - in fact we’ve got the Climate Change Act to thank for that.

I do wonder what the long term impact might be on the EU itself. The UK has always been one of the strongest advocates of ambition on emission reduction. The balance of views within the remaining EU27 might be different.

10. What would your advice be to other countries now thinking about legislation to meet similar climate change goals?

Take a look at what the UK has done, learn from our application along the way, but take our positive experience with the Climate Change Act as a salutary lesson. Do it, and do it as soon as possible. There are benefits from early action - in cost terms, for new industrial opportunity and for the planet.

Read more from our CCA at 10 Class of 2008