The Department for Business, Energy and Industrial Strategy commissioned an independent Net Zero review of the government’s approach to delivering its Net Zero target, to ensure we are delivering Net Zero in a way that is pro-business and pro-growth. See the Terms of Reference for further information on the Review.

What is the UK’s Net Zero review?

The review will consider how our approach to Net Zero can:

• Deliver maximum economic growth and investment, driving opportunities for private investment, jobs, innovation, exports, and growth right across the UK
• Support UK energy security and affordability for consumers and business and the need to rapidly increase and strengthen UK energy production and supply
• Minimise costs borne by businesses and consumers, particularly in the short-term.

The review will assess the economic co-benefits associated with different policies and how we can drive down the cost curve for Net Zero technologies. It will consider innovative approaches and ways of delivering our target that ensure the government maximises the economic opportunities presented by Net Zero.

BEIS have split up 30 questions into those that are answerable by all, and those best answered by different groups of stakeholders – business; the public; local government, communities & other organisations delivering Net Zero locally; and academia & innovators.

Key points

Recent global factors have dramatically changed the economic landscape and elevated the importance of a secure and reliable energy system for both economic stability and growth. The landscape might have changed, but the wide range of co-benefits to decarbonising the energy sector remain and require renewed focus.

Energy Systems Catapult has long advocated that a Net Zero energy system, supported by innovative and intelligent systems design, will be inherently more reliable, secure and cost-effective. Such an energy system would be the foundation of a net zero economy and would: create well-paying jobs, help regenerate local communities, make Britain a global innovation leader, and attract foreign investment.

With intelligent design, a Net Zero energy system will support:

• Energy security – encouraging the development of a diverse range of homegrown and innovative low carbon technologies (including flexibility) and energy vectors that can mitigate against exogenous shocks, such as the war in Ukraine.
• Cost efficiencies – improving system design to identify inefficiencies and unintended consequences from intervention, whilst reducing infrastructure costs. For example, finding ways to use the oversupply of renewables during periods of low demand.
• Economic growth – promoting homegrown, innovative small and medium enterprises (SMEs) to transform local economies and grow UK export potential. Such innovations would also create opportunities for businesses and consumers to access low carbon technologies that transform productivity.

Supporting the co-benefits of a Net Zero energy system requires a wholes systems approach. We recommend the following high-level principles for intelligent Net Zero energy system design:

• Make the system work for energy consumers – understanding how energy will be used and generated, from households to industry, transforming the demand-side in addition to the supply-side to maximise the benefits of large-scale investment in variable renewables. An energy system with flexibility built in will be essential for coping with energy demands as the proportion of low carbon technologies on the system increases.
• Adopt a whole systems approach to policy design – which considers all parts of the physical energy system (including energy vectors, infrastructure and services), the needs of all end users (including households and businesses) and how the whole system is controlled and shaped by policy, markets and digital arrangements. A whole energy system approach also recognises the value of experimental policy design, using sandboxes, such as our Living Lab, to test innovative policy scenarios.
• Recognise the value of place-based energy planning and partnerships – incorporating local and sector specific insights to support local growth opportunities and efficiencies.
• Implement technology agnostic incentives (including funding for innovators) with a focus on outcomes – such as energy efficiency and emissions reduction, enabling markets to reveal the most innovative solutions and drive long-term demand for low carbon technologies.
• Provide clear guidance to sectors and stakeholders – help energy consumers make informed choices about the technologies most suited to their needs and business models. Long-term policy signals are particularly important for assets requiring long-term investment, such as in heavy industry.
• Adopt a transparent and adaptive approach to data analysis – avoiding the trap of “what gets measured, gets managed” by ensuring progress towards Net Zero delivery is not only measured by easy-to-model centralised policies. Doing so risks neglecting the value of place-based policies and the importance of policy enablers such as investment in infrastructure.

Given the wide-ranging nature of Energy Systems Catapult work, and the limited response window for this call for evidence, we provided a key summary (above) to demonstrate the co-benefits of a Net Zero energy system that is designed in a way that harnesses innovation and benefits energy consumers. We have included some more specific examples of our work in responses to three of the 30 questions, but we strongly encourage those answers be reviewed in the context of this key summary.

Question 4: What more could government do to support businesses, consumers and other actors to decarbonise?

A greater understanding of, and focus on, consumer needs is crucial in reforming markets, policies and the regulatory arrangements to enable innovation to flourish. In a smarter energy system, policies need to orientate around good consumer outcomes, not technologies. This means government should be providing unbiased tools and guidance that enable energy consumers to make informed choices about what low carbon technologies are most suited to their needs. Download our full response, where we have included specific examples of how this could work in practise for households, and what support SME innovators need to provide the low carbon technologies for an intelligent Net Zero energy system.

Question 5: Where and in what areas of policy focus could net zero be achieved in a more economically efficient manner?

Economic efficiencies are not necessarily a precursor to growth. To grow the low carbon economy of the future, targeted investment is needed in the short-medium term. Coupled with that, policies should be designed to encourage low carbon technologies to be adopted in a more economically efficient manner. This includes: a revaluation of sector specific carbon pricing signals, seizing energy efficiency opportunities at the local level, and rethinking electricity market arrangements to promote energy and cost efficiencies. Download our full response, where we have included specific examples.

Question 30: Is there a policy idea that will help us reach net zero you think we should consider as part of the review?

Energy Systems Catapult advocates for a whole systems approach to policy design. A whole systems approach considers all parts of the physical energy system (including energy vectors, infrastructure and services), the needs of all end users (including households and businesses) and how the system is controlled and shaped by policy, markets and digital arrangements.

In our response to this call for evidence, we have demonstrated a whole systems view of complementary policy ideas, including the co-benefits of a Net Zero energy system (download full response to see Table 1).

Policy ideas should not be assessed in isolation. But it may be necessary to target specific areas of policy as part of this review. We have identified the following policy areas as integral to decarbonising the energy system:

• Net Zero Carbon Policy: developing a sector led approach to an innovation friendly, economic wide carbon policy framework to achieve Net Zero.
• Rethinking Electricity Markets: developing in-depth proposals to reform electricity markets to best enable innovative, efficient, whole energy system decarbonisation.
• Zero Carbon Buildings: highlighting six steps towards an enduring framework of long-term policies needed to drive heat and building decarbonisation on a grand scale.
• Local Area Energy Planning: looking at how to introduce, implement and integrate our pioneering Net Zero Planning process, with existing (or new) governance, powers and duties.

Our policy work demonstrates exciting and innovative approaches to implementing a Net Zero energy system that works for energy consumers. Big decisions need to be made by government to push for the innovative systems changes required. But the potential for unintended consequences in large scale systems changes is a credible concern for policymakers. Therefore, to progress innovative policy ideas, we strongly recommend government explore options for experimental policy design, using sandboxes, such as the Catapult’s Living Lab, to test innovative policy scenarios in low-risk environments before they are rolled out more widely.