Source · Select Committees · Public Accounts Committee
Recommendation 3
3
Accepted
Set out plans to provide greater clarity to the private sector for decarbonisation investment.
Recommendation
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.
Government Response 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 as specific actions.
Government Response
Accepted
HM Government
Accepted
The government agrees with the Committee’s recommendation. encourage investment. Earlier this year the government published Mobilising Green Investment: the 2023 Green Finance Strategy, alongside the Powering Up Britain: the Net Zero Growth Plan and Powering up Britain: the Energy Security Plan. The Green Finance Strategy provides clarity on pathways for investment across net zero, and communicates to businesses, investors and the finance sector the UK’s plan to grow investment. These publications set out plans to grow green investment across all parts of the UK, which include providing up to £20 billion funding for early deployment of Carbon Capture, Usage and Storage, and launching the fifth Contracts for Difference allocation round, the first round to run on an annual basis. These provide investor clarity on the government’s overall approach to enhance our country’s energy security, seize the economic opportunities of the transition, and deliver on our net zero commitments. In addition, the department is also communicating more detailed investment needs and opportunities on a sector-by-sector basis. In March 2023 it published the Offshore Wind Net Zero Investment Roadmap, the Heat Pump Net Zero Investment Roadmap, and the Hydrogen Net Zero Investment Roadmap, as well as an updated version of the Carbon Capture Usage and Storage Investment Roadmap. The department considers that this is an appropriate way to provide detail relevant to particular groups of investors and plans to publish further roadmaps for other sectors that need private sector investment later in 2023.