Recommendations & Conclusions
15 items
2
Conclusion
Fifty-Ninth Report - Decarbonising the …
Accepted
We are sceptical that plans for expanding nuclear, solar and wind power are credible. Government has set itself highly challenging electricity generating capacity ambitions for nuclear (24GW by 2050), solar (70GW by 2035) and offshore wind power (50GW by 2030). By comparison, the UK’s current operating capacity is less than …
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We are sceptical that plans for expanding nuclear, solar and wind power are credible. Government has set itself highly challenging electricity generating capacity ambitions for nuclear (24GW by 2050), solar (70GW by 2035) and offshore wind power (50GW by 2030). By comparison, the UK’s current operating capacity is less than a quarter of each of these ambitions. For example, its nuclear ambitions include a mix of large stations as well as so-called SMRs, a type of smaller reactor untested in the UK and not operating at scale anywhere in the world. The Department considers it worth pursuing this (and other nascent technologies) to ensure the UK has a range of options from which to select its ultimate power generating mix, and is not over- reliant on any single technology. The Department is creating Great British Nuclear to build capacity, expertise and a regulatory regime to expand its nuclear pipeline; however, in the last two decades, government has only agreed one project which has entered construction, at Hinkley Point C. The Department also says it is tracking offshore wind projects at various stages of development that could produce 80GW of electricity when operating. Should these projects generate this much electricity, the Department would exceed its ambition for offshore wind power; however, it acknowledges that not all these projects will succeed. Recommendation 2: The Department should provide annual updates to Parliament that demonstrate progress against milestones towards its objectives and identify how significant risks are being mitigated. 6 Decarbonising the power sector
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Government response AI summary
The government agrees with the recommendation but states it already provides annual updates to Parliament through its responses to the Climate Change Committee's annual Progress Reports and other departmental publications.
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HM Treasury
3
Recommendation
Fifty-Ninth Report - Decarbonising the …
Accepted
We are not convinced that government is providing enough clarity to the private sector to attract the investment that is necessary to build infrastructure, spur innovation and drive competition to lower costs. Government estimates that hundreds of billions of pounds in public and private investment will be needed to decarbonise …
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We are not convinced that government is providing enough clarity to the private sector to attract the investment that is necessary to build infrastructure, spur innovation and drive competition to lower costs. Government estimates that hundreds of billions of pounds in public and private investment will be needed to decarbonise the power sector, and private investment will be a major component of that. The Department considers that the UK has the market mechanisms, business models and regulation to provide investor confidence. Recently, in what the Department considers a signal to the sector, the Chancellor announced in the Spring Budget £20 billion for carbon capture, usage and storage. However, this technology is untested at scale in the UK, and this Committee has seen how previous government attempts to get it off the ground have failed repeatedly. The Department also points to competitions for contracts for difference as key to driving innovation in offshore wind, reducing expectations of its cost in 2025 from £125 per megawatt hour in 2012 to £50 today. It considers that the regularity of contract for difference auctions provides certainty to investors. However, government changes and policy inconsistency erode investor confidence and increase the cost of capital. Recommendation 3: The Department should set out in the delivery plan due later this year how it will provide greater clarity to the private sector to encourage the investment it needs to decarbonise the power sector.
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Government response AI summary
The government published several strategies and roadmaps (Green Finance Strategy, Powering Up Britain, specific sector roadmaps in March 2023) to provide investment clarity, and plans to publish further roadmaps for other sectors later in 2023. It highlighted £20bn funding for CCUS and annual CfD auctions …
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HM Treasury
4
Recommendation
Fifty-Ninth Report - Decarbonising the …
Accepted
It is not clear the Department has the support it needs from other departments to achieve government’s power sector decarbonisation ambition. While it holds responsibility for, and takes the lead for achieving energy security and net zero, the Department nevertheless must rely on wider government to achieve its objectives. The …
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It is not clear the Department has the support it needs from other departments to achieve government’s power sector decarbonisation ambition. While it holds responsibility for, and takes the lead for achieving energy security and net zero, the Department nevertheless must rely on wider government to achieve its objectives. The Department has offshore wind, hydrogen, electricity network and nuclear champions whose role includes identifying potential barriers, such as local planning issues and availability of the necessary skills in the workforce. Other departments are responsible for such wider issues, including the Department for Levelling Up, Housing and Communities for planning arrangements and the Department for Education for skills in the workforce. It is essential that, as the lead department for its objectives, it builds partnerships across government to successfully influence these and other relevant departments. However, this can be tricky when power sector decarbonisation activities may be in tension with other departments’ other priorities. Recommendation 4: The Department should set out in its Treasury Minute response how it will influence other departments to ensure they collaborate and prioritise activities in pursuit of power sector decarbonisation.
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Government response AI summary
The government states it already has robust governance and reporting processes at ministerial and official levels, including various committees and groups, to ensure cross-departmental collaboration and prioritization for power sector decarbonisation.
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HM Treasury
6
Conclusion
Fifty-Ninth Report - Decarbonising the …
Accepted
We are not yet clear what the Department’s plans are in respect of energy efficiency and consumer behaviour. The Department acknowledges that improving energy efficiency and changing consumer behaviour are key to meeting net zero. However, recent energy bills support schemes have prioritised reducing costs to consumers over encouraging reduced …
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We are not yet clear what the Department’s plans are in respect of energy efficiency and consumer behaviour. The Department acknowledges that improving energy efficiency and changing consumer behaviour are key to meeting net zero. However, recent energy bills support schemes have prioritised reducing costs to consumers over encouraging reduced demand for energy. In the 2022 Autumn Statement, the Chancellor announced new funding of £6 billion from 2025 to 2028 to improve energy efficiency for households, businesses and the public sector. The Chancellor announced that an Energy Efficiency Taskforce would be charged with improving energy efficiency in the UK by reducing energy consumption from buildings and industry by 15% by 2030 compared to 2021 levels. In March 2023, government announced a further £1.4 billion to support energy efficiency, including for low- income households. However, government’s track record in implementing energy efficiency schemes is patchy at best. In December 2021 we reported that such schemes were often fragmented, and that stop-start policy was an obstacle to long- term progress towards government’s energy efficiency ambitions. It is not clear what energy efficiency and consumer behaviour assumptions the Department used when modelling pathways to a decarbonised power sector. In February 2022 we reported that government often over-estimates consumer buy-in to its policies, including those aimed at reducing emissions. Recommendation 6: Alongside its Treasury Minute response to this report, the Department should write to the Committee setting out the demand assumptions it has used in its modelling and how this reflects policies and plans to promote energy efficiency and influence consumer behaviour. 8 Decarbonising the power sector 1 Government’s plans to decarbonise the power sector
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Government response AI summary
The government states it has already modelled two scenarios (Net Zero Higher and Lower) and that full details of its modelling, assumptions, and how policies reflect energy efficiency and consumer behaviour are set out in the technical annex to the Net Zero Strategy and the …
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HM Treasury
9
Conclusion
Fifty-Ninth Report - Decarbonising the …
Accepted
The government estimated in its 2021 Net Zero Strategy that £280 to £400 billion of public and private investment in new generating capacity would be needed by 2037 to decarbonise the power sector. These costs represent the construction costs for power generation only, and do not include the costs for …
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The government estimated in its 2021 Net Zero Strategy that £280 to £400 billion of public and private investment in new generating capacity would be needed by 2037 to decarbonise the power sector. These costs represent the construction costs for power generation only, and do not include the costs for all aspects of decarbonising the power sector, such as network construction or research and innovation on technologies.25 Private investment will be a major contributor to the financial capital required to decarbonise.26 A clear delivery plan could increase the confidence of investors to fund new infrastructure, which could reduce their costs of capital.27 We received written evidence from Energy UK that flagged a negative impact on investment in the UK, given it is seen as less favourable when compared to the USA and EU, and spoke of a coming ‘investment hiatus’ in the UK due in large part to uncertainty.28 The Department believes that the UK will never be able to compete financially with the USA; however, it believes the UK has the market mechanisms, business models and regulation to provide confidence to investors and attract the necessary investment.29 19 Qq 5, 41; C&AG’s Report, Figure 8 20 DPS0013 21 Qq 5–7; C&AG’s Report para 1.9 and Figure 8 22 Qq 7, 32, 42, 74; C&AG’s Report, paras 1.13 and 2.6 23 Q 39 24 Q 40 25 Department for Business, Energy & Industrial Strategy, Net Zero Strategy: Build Back Greener, 19 October 2021, page 99; C&AG’s Report, para 6 26 C&AG’s Report, para 2.17 27 Q 88; C&AG’s Report, para 11 28 DPS0019 29 Q 88 Decarbonising the power sector 11
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Government response AI summary
The government agrees with the committee's observation, recognizing the importance of clear plans for private investment. It has published several strategies, committed £20 billion for CCUS, launched annual Contracts for Difference rounds, and is producing sector-specific investment roadmaps to provide investor clarity.
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HM Treasury
10
Conclusion
Fifty-Ninth Report - Decarbonising the …
Accepted
The Department told us that its role is to enable competition to drive innovation and cost reduction, and that the best example of this is how contracts for difference have sustained investment and innovation from the private sector in offshore wind. It told us that costs fell far faster and …
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The Department told us that its role is to enable competition to drive innovation and cost reduction, and that the best example of this is how contracts for difference have sustained investment and innovation from the private sector in offshore wind. It told us that costs fell far faster and more steeply than anyone was expecting. As an illustration, an assessment by the previous Department for Energy and Climate Change in 2012 estimated a cost of £125MW/h in 2025. The Department’s current estimate for that period is £50MW/h.30 It considers that the regularity of annual contracts for difference auctions will provide the industry with the confidence it needs to continue to invest and develop new project proposals.31
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Government response AI summary
The government agrees and aims to provide clarity to the private sector to encourage investment by publishing the 2023 Green Finance Strategy and other plans. These initiatives include £20 billion for CCUS, annual Contracts for Difference rounds, and sector-specific investment roadmaps to boost investor confidence.
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HM Treasury
11
Conclusion
Fifty-Ninth Report - Decarbonising the …
Accepted
At the 2023 Spring Budget, the Chancellor announced £20 billion for carbon capture, usage and storage (commonly referred to as CCUS).32 However, while providing a signal to the sector and investors, this technology is untested at scale in the UK. The Department acknowledges that its current ambition for CCUS to …
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At the 2023 Spring Budget, the Chancellor announced £20 billion for carbon capture, usage and storage (commonly referred to as CCUS).32 However, while providing a signal to the sector and investors, this technology is untested at scale in the UK. The Department acknowledges that its current ambition for CCUS to capture 30 megatons by 2030 is hugely ambitious; however, it considers that its current plan is more ‘holistic’ than previous attempts. By this it means that different carbon emitting sources, carbon capture projects, and transport and storage infrastructure are clustered, and that this will make an important difference compared to previous attempts that were focused around one type of power-based carbon emitter, with expectations that industrial emitters would follow later.33 We received written evidence from The Carbon Capture and Storage Association that indicated a number of key policy decisions and legislation still required in this parliament for government to achieve its CCUS deployment ambitions.34 This Committee has seen how previous government attempts to get CCS (carbon capture and storage) off the ground have repeatedly failed, and in 2017 we reported that ‘Halting CCS’s deployment means that the UK will have to pay billions of pounds more to meet its decarbonisation targets, has missed opportunities to be at the forefront of a growing global industry, and has damaged investors’ confidence in working with the government on CCS in the future.’35
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Government response AI summary
The government accepts the committee's observation, stating a target implementation date of December 2023, and details its efforts to provide clarity and encourage investment through recent publications, £20 billion funding for CCUS, and plans to publish further sector-specific roadmaps later in 2023.
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HM Treasury
12
Conclusion
Fifty-Ninth Report - Decarbonising the …
Accepted
More generally, changes in policy direction can affect investor confidence in government.36 Energy policy instability, such as the stop-start nature of some initiatives like the Green Homes Grant Voucher Scheme, which was extended and then abruptly closed, have eroded investor confidence in government.37 In March 2022 we highlighted that, in …
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More generally, changes in policy direction can affect investor confidence in government.36 Energy policy instability, such as the stop-start nature of some initiatives like the Green Homes Grant Voucher Scheme, which was extended and then abruptly closed, have eroded investor confidence in government.37 In March 2022 we highlighted that, in this Committee’s recent reports into Achieving Net Zero (HC 935), Environmental tax measures (HC 937), Low emission cars (HC 186) and the Green Homes Grant Voucher Scheme (HC 635), government has too often pursued stop-start strategies which undermine confidence for business, investors and consumers.38 30 Q 32 31 Qq 39–40 32 Q 59 33 Q 57–8 34 DPS0018 35 HC Committee of Public Accounts, Carbon Capture and Storage, Sixty-fourth Report of Session 2016–17, HC 1036, April 2017 36 C&AG’s Report, para 11 37 Qq 34, 88; HC Committee of Public Accounts, Green Homes Grant Voucher Scheme, Twenty-Seventh Report of Session 2021–22, HC 635, December 2021 38 HC Committee of Public Accounts, Achieving Net Zero: Follow up; Forty-First Report of Session 2021–22, HC 642, March 2022 12 Decarbonising the power sector Government collaborating to achieve its ambition
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Government response AI summary
The government agrees with the committee's observation and has published the 2023 Green Finance Strategy, Net Zero Growth Plan, and Energy Security Plan to provide clarity and encourage investment. These plans include £20 billion for CCUS, annual Contracts for Difference rounds, and sector-specific investment roadmaps.
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HM Treasury
13
Conclusion
Fifty-Ninth Report - Decarbonising the …
Accepted
On 7 February 2023, the government announced that the Department for Business, Energy & Industrial Strategy (BEIS) would close, and its responsibilities would transfer to new departments, including the Department for Energy Security & Net Zero (the Department).39 The Department therefore takes the lead for energy security and net zero, …
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On 7 February 2023, the government announced that the Department for Business, Energy & Industrial Strategy (BEIS) would close, and its responsibilities would transfer to new departments, including the Department for Energy Security & Net Zero (the Department).39 The Department therefore takes the lead for energy security and net zero, and is responsible for achieving the government’s decarbonised power sector ambition.40 It believes that the machinery of government changes that led to its creation provide it with the focus and bandwidth it needs to lead decarbonising the power sector, both now and to scale-up activity in future.41 Nevertheless, it must rely on and successfully influence other government departments and organisations to help it to achieve its power sector decarbonisation ambitions, when it has limited levers to do so.42
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Government response AI summary
The government states the recommendation has been implemented, describing its existing robust governance and reporting processes at both ministerial and official levels, including regular inter-departmental meetings, to ensure collaboration and alignment across government departments on decarbonising the power sector.
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HM Treasury
14
Conclusion
Fifty-Ninth Report - Decarbonising the …
Accepted
The Department has created offshore wind, hydrogen, electricity network, and nuclear champions whose role includes identifying potential risks, barriers and bottlenecks to progress and making recommendations for both the Department and other parts of government where issues cross departmental responsibilities. Planning permission and skills in the workforce are two relevant …
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The Department has created offshore wind, hydrogen, electricity network, and nuclear champions whose role includes identifying potential risks, barriers and bottlenecks to progress and making recommendations for both the Department and other parts of government where issues cross departmental responsibilities. Planning permission and skills in the workforce are two relevant issues.43 The Department for Levelling Up, Housing and Communities is responsible for planning arrangements.44 The Department told us that the planning system is a key enabler, and that 60% of the nationally significant infrastructure projects over the next decade will relate to energy (such as generating infrastructure or networks).45 The Department for Education is responsible for skills in the workforce, particularly at the entry level.46 In written evidence received from the Local Government Association, it told us that across England, by 2050, there could be 1.18 million jobs in low-carbon sectors; but that the workforce currently lacks the right skills to meet this future demand and the short-term funding landscape does not provide the certainty for businesses and education providers to invest in the training and skills required to decarbonise energy.47
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Government response AI summary
The government agrees with the committee's observation, stating the points raised are already implemented through existing robust governance and cross-departmental processes to coordinate action across relevant departments.
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HM Treasury
15
Conclusion
Fifty-Ninth Report - Decarbonising the …
Accepted
The Department told us that it is essential that it builds strong partnerships and collaborative relationships with relevant departments across Whitehall, and that it works with No. 10 and the Cabinet Office to ensure that departments are aligned.48 However, other departments and organisations have their own issues and competing ambitions.49 …
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The Department told us that it is essential that it builds strong partnerships and collaborative relationships with relevant departments across Whitehall, and that it works with No. 10 and the Cabinet Office to ensure that departments are aligned.48 However, other departments and organisations have their own issues and competing ambitions.49 The Department told us that a shortage of skills in, for example, the nuclear industry would take many years to address.50 39 C&AG’s Report, footnote 2 40 C&AG’s Report, para 3 41 Qq 30–31 42 Qq 2, 31, 104–106 43 Qq 26, 104 44 Q 26 45 Qq 27, 47–48 46 Q 106 47 DPS0031 48 Qq 2, 31 49 Q 106 50 Q 49 Decarbonising the power sector 13 2 Energy efficiency, consumer behaviour and the costs to consumers The impact of decarbonising the power sector on energy bill payers and taxpayers
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Government response AI summary
The government states the recommendation has been implemented, detailing its existing robust governance and reporting processes, including ministerial and official level committees, to ensure collaboration and alignment across departments on decarbonising the power sector.
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HM Treasury
20
Conclusion
Fifty-Ninth Report - Decarbonising the …
Accepted
Government’s Net Zero Strategy expects a 40% to 60% increase in electricity demand by 2035 as more modes of transport and heating switch to electricity from fossil fuels.61 The Department told us it is expecting a corresponding increase in electricity generation from roughly 300TWh (a terawatt-hour is a unit of …
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Government’s Net Zero Strategy expects a 40% to 60% increase in electricity demand by 2035 as more modes of transport and heating switch to electricity from fossil fuels.61 The Department told us it is expecting a corresponding increase in electricity generation from roughly 300TWh (a terawatt-hour is a unit of power) today to between 450TWh and 485TWh by 2035.62 Reducing peak electricity demand by encouraging households and businesses to be more efficient and flexible in how and when they use electricity reduces the maximum generating and network capacity required.63 The Net Zero Strategy states that promoting more ambitious and sustained demand reduction and energy efficiency measures to reduce overall power demand is key a factor in reducing the delivery risk of achieving net zero.64 However, recent energy bills support schemes, such as the Energy Price Guarantee, have prioritised reducing costs to consumers over encouraging reduced demand for energy.65 In November 2022 we recommended that the Department needed to ensure that administrative issues did not prevent support being provided to vulnerable households in a timely manner.66 We have recently reported that the Department introduced the Energy Price Guarantee support scheme quickly, within three weeks, but that wider reform of electricity markets (through the Review of Electricity Market Arrangements) would not be implemented until the mid-2020s.67
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Government response AI summary
The government states the recommendation has been implemented, describing its existing Net Zero Higher and Lower modelling scenarios which estimate future power demands and consider consumer choices and energy efficiency. Government policies are designed to incorporate these factors and incentivise behavioural change, as detailed in …
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HM Treasury
21
Conclusion
Fifty-Ninth Report - Decarbonising the …
Accepted
We asked the Department about its plans to encourage consumers, industry and households to invest in greater energy efficiency. It told us that this is an important aspect of its strategy, which includes encouraging short-term demand flexibility from consumers to use less electricity at times of peak demand (by, for …
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We asked the Department about its plans to encourage consumers, industry and households to invest in greater energy efficiency. It told us that this is an important aspect of its strategy, which includes encouraging short-term demand flexibility from consumers to use less electricity at times of peak demand (by, for example, turning appliances off), as well as energy efficiency measures. The Department indicated that, for example, a requirement to ensure properties are at least EPC rating C has resulted in an increase in the homes achieving this standard from 14% in 2010 to 47% now. However, it told us the EPC rating C requirement depends on implementing it being cost-effective, affordable and practical to do so, and in the private rented sector there is an ongoing policy debate as to whether there is a maximum landlords should pay.68 60 Qq 35, 85 61 Department for Business, Energy & Industrial Strategy, Net Zero Strategy: Build Back Greener, 19 October 2021, page 78 62 Qq 81–83 63 C&AG’s Report para 1.13 64 Department for Business, Energy & Industrial Strategy, Net Zero Strategy: Build Back Greener, 19 October 2021, para 43 65 Q 28 66 HC Committee of Public Accounts, Regulation of energy suppliers, Twenty-Fifth Report of Session 2022–23, HC 41, November 2022 67 HC Committee of Public Accounts, Energy bills support, Fifty-eighth Report of Session 2022–23, HC 1074, June 2023 68 Q 38 Decarbonising the power sector 15
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Government response AI summary
The government agrees with the committee's observation, stating the points raised are already implemented through existing strategies that use modelling scenarios and policies to encourage energy efficiency and consumer behavioural change, as detailed in their Carbon Budget Delivery Plan.
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HM Treasury
22
Conclusion
Fifty-Ninth Report - Decarbonising the …
Accepted
In its 2022 Autumn Statement the Chancellor announced new funding of £6 billion from 2025 to 2028 to improve energy efficiency for households, business and the public sector. The Chancellor announced that an Energy Efficiency Taskforce would be charged with improving energy efficiency in the UK by reducing energy consumption …
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In its 2022 Autumn Statement the Chancellor announced new funding of £6 billion from 2025 to 2028 to improve energy efficiency for households, business and the public sector. The Chancellor announced that an Energy Efficiency Taskforce would be charged with improving energy efficiency in the UK by reducing energy consumption from buildings and industry by 15% by 2030, compared to 2021 levels. The Department told us that the Taskforce would align incentives across the private sector, households and government. In March 2023, government announced a further £1.4 billion to support energy efficiency, including for low-income households.69 However, government does not have a successful track record of implementing energy efficiency measures. In December 2021, we reported that government has previously implemented a number of energy efficiency schemes aimed at private domestic housing, for example The Green Deal and the Renewable Heat Incentive, and this fragmented, stop-go activity has hindered stable long-term progress towards government’s energy efficiency ambitions.70
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Government response AI summary
The government agrees with the committee's observation, stating the points raised are already implemented through its existing strategies that use modelling scenarios and policies to encourage energy efficiency and behavioural change, as detailed in the Carbon Budget Delivery Plan.
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HM Treasury
23
Conclusion
Fifty-Ninth Report - Decarbonising the …
Accepted
We also asked the Department about how government can influence consumer behaviour. The Department told us that its modelling of power sector decarbonisation by 2035 covers different pathways characterising different assumptions of consumer behaviour and energy efficiency (such as home storage), but acknowledged that it does not know which of …
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We also asked the Department about how government can influence consumer behaviour. The Department told us that its modelling of power sector decarbonisation by 2035 covers different pathways characterising different assumptions of consumer behaviour and energy efficiency (such as home storage), but acknowledged that it does not know which of those pathways we are on.71 We reported in March 2022 that significant uncertainty remains as to whether consumers will rapidly change their behaviours in line with the expectations of government’s Net Zero Strategy, and that government has a poor track record of engaging consumers, including over-estimating buy-in to its policies.72 69 Qq 33–34 70 HC Committee of Public Accounts, Green Homes Grant Voucher Scheme, Twenty-Seventh Report of Session 2021–22, HC 635, December 2021 71 Q 37 72 HC Committee of Public Accounts, Achieving Net Zero: Follow up, Forty-First Report of Session 2021–22, HC 642, March 2022 16 Decarbonising the power sector
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Government response AI summary
The government states the recommendation has been implemented, explaining its existing Net Zero Higher and Lower modelling scenarios that estimate future power demands and consider consumer choices and energy efficiency. Government policies are designed to incorporate these factors and incentivise behavioural change.
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HM Treasury