What the end of UK coal power means for major energy users

After more than 57 years of service, the Ratcliffe-on Soar coal plant in Nottinghamshire finally ceased operations in September, officially marking the end of coal-powered electricity generation in the UK. This is the latest in a long line of measures taken by the government to reach net zero emissions by 2050.¹

Owing primarily to decarbonisation across the energy sector, the UK successfully cut greenhouse gas emissions by 53% between 1990 and 2023, becoming the first major economy in the world to halve its emissions.²

Within the power sector, the use of coal to generate electricity has decreased by 97% since 2013 when coal accounted for 41% of the UK’s total energy mix. Last year, coal accounted for just 1%,³ while low-carbon sources (most notably from wind and solar) contributed more than half (51%).⁴

But with the termination of coal power marking a major milestone in the UK’s journey to net-zero, how can businesses best take advantage of the transition to low carbon electricity?

Scope 2 covers greenhouse gas emissions that a company causes indirectly through the purchase and use of energy. There are two main approaches for reducing emissions attributed to power, each with its own set of benefits and costs: 1) transitioning to renewable energy, and 2) improving energy efficiency. Of course, these two options are not mutually exclusive and utilising both can offer the greatest overall impact. By shifting to renewable energy sources (including renewable energy procurement and on-site renewable generation) coupled with improving energy efficiencies, companies can significantly lower their carbon footprint while, crucially, reducing operational costs.⁵

Depending on the size and location of your business, you may be affected by a number of UK legislations designed to drive the Powering up Britain strategy⁶ and accelerate progress towards reaching net zero by 2050. Some examples are Streamlined Energy and Carbon Reporting (SECR), Energy Savings Opportunity Scheme (ESOS), the UK Emissions Trading Scheme (UK ETS), and the Carbon Border Adjustment Mechanism (UK CBAM). Such legislation puts the onus on businesses to monitor and evaluate their greenhouse gas emissions, making it mandatory to provide information on energy use and greenhouse gas emissions and submit a 4-year Carbon Reduction Plan (CRP) which summarises current emissions and, importantly, plans to reduce them.⁷

Trends in consumer behaviour are another factor contributing to decisions on reducing Scope 2 emissions. A survey by Deloitte revealed that a quarter of consumers are prepared to pay more for sustainability, while nearly a third claimed their trust in brands would be improved if they had transparent, accountable, and socially and environmentally responsible supply chains.⁸

Renewable energy procurement

One of the most straightforward pathways to decarbonising Scope 2 emissions from power use is through renewable energy procurement. There are various types of supply contracts available, including fixed (a set price up front), flexible (adaptable to wholesale price changes), and pass-through (a mix of set rates and “passed through” costs). Whichever category best suits your business’ requirements, you should consider products supplied with Renewable Energy Guarantees of Origin (REGOs). These ensure that the electricity you procure is sourced from renewable energy sources – whether wind, solar, hydro, biomass, or a mix of the above.

Businesses looking to de-risk their renewable energy procurement could also consider power purchase agreements (PPAs) as part of their wider energy strategy, an approach that offers relative certainty amid volatile energy markets. These contracts can help businesses achieve Scope 2 goals, and can support the growth of the renewable generation industry while simultaneously locking in long-term pricing for a business’ renewable electricity. Choosing which style of PPA suits your business’ requirements and navigating the complex landscape can prove challenging, which makes it important to seek expert guidance from either your supplier or a third party (such as Shell’s wholesale trading division) to manage the physical delivery aspects.

On-site generation with energy storage

Another option for businesses looking to alleviate Scope 2 emissions is on-site renewable energy generation, which enables them to reduce reliance of bought-in electricity and take more complete control of their energy decarbonisation. Rooftop solar is the most common solution for on-site energy generation and has quickly grown in popularity across the UK.⁹

On-site generation can also be supplemented with the installation of energy storage, allowing businesses to store excess self-generated energy and deploy it only when needed. By storing electricity for use during periods of low solar or wind power generation, businesses can further reduce their dependence on grid electricity and achieve a faster return on investment.

Norsk Hydro ASA (Hydro) is a global leader in aluminium and renewable energy. Headquartered in Norway but with operations worldwide, the company employs more than 33,000 employees across 40 countries and is active across a broad range of market segments spanning aluminium production, energy, metal recycling, renewables and battery manufacturing. While significant progress has been made to maximise production efficiencies and reduce group-wide energy consumption, Hydro remains a heavily energy-intensive business due to the nature of its operations. As part of efforts to tackle this, Hydro selected Shell Energy to help decarbonise its operations. The agreement covers the supply of 144 gigawatt hours (GWh) of natural gas and 56 GWh of renewable electricity. The electricity, backed by REGOs, is generated from the Rhyl Flats Windfarm situated off the coast of Llandudno – a 25-turbine site with 90 megawatts (MW) of installed capacity. This renewable electricity helps to power electric forklifts, automated cooling towers and energy harvesting, which in turn will enable Norsk Hydro to produce lower-carbon aluminium. By providing 100% REGO-backed renewable electricity, Shell Energy has supported Hydro’s efforts to adopt a more sustainable energy procurement strategy and helped accelerate its transition to net zero.

¹ https://lordslibrary.parliament.uk/mission-zero-independent-review-of-net-zero/

² https://www.gov.uk/government/news/uk-half-way-to-net-zero

³ https://www.nationalgrideso.com/news/britains-electricity-explained-2023-review

⁴ https://www.nationalgrideso.com/news/britains-electricity-explained-2023-review

⁵ https://www.deloitte.com/uk/en/issues/climate/renewable-energy.html

⁶ https://www.gov.uk/government/publications/powering-up-britain

⁷ https://assets.publishing.service.gov.uk/media/60ba4d208fa8f57ce980b5b7/PPN_0621_Technical_standard_for_the_Completion_of_Carbon_Reduction_Plans__2_.pdf

⁸ https://www.deloitte.com/uk/en/Industries/consumer/research/sustainable-consumer.html

⁹ https://www.theecoexperts.co.uk/solar-panels/solar-statistics

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