Source · Select Committees · Public Accounts Committee
Recommendation 5
5
Rejected
Publish delivery plan information on decarbonisation cost impact for energy bill payers and taxpayers.
Recommendation
The Department has not yet set out how it expects decarbonising the power sector will impact energy bill payers and taxpayers. While government recognises that initially it will rely heavily on private investment to fund the clean energy transition, the costs to build, maintain and operate the power system are typically passed onto consumer bills. The Climate Change Committee has estimated that future capital expenditure costs will increase running up to 2035 and then decrease along with operating costs, and government has estimated that £280 to £400 billion of public and private investment in new generating capacity will be needed by 2037. However, the Department has not yet assessed what this ultimately means for energy bill and taxpayers. Energy affordability, driven by unprecedented wholesale gas prices, has Decarbonising the power sector 7 been a significant contributor to the current cost-of-living crisis. In the future, how energy is bought and sold will depend on the outcome of the government’s ongoing Review of Electricity Market Arrangements. The Department expects reform of the retail market to result in more scope for suppliers to offer new tariffs that accommodate consumer demand flexibility, so bill payers can opt to reduce their bills by increasing their energy use when demand is lower. Recommendation 5: The Department should publish in the delivery plan due later this year information on when and how the costs of decarbonising the power sector are likely to have an impact on energy bill payers and taxpayers, and update this regularly when new information becomes available that changes the cost profile.
Government Response Summary
The government rejects the recommendation, stating that future costs are uncertain and that it already publishes information on cost impacts for specific policy interventions in Impact Assessments and monitors energy prices via Quarterly Energy Prices reports.
Government Response
Rejected
HM Government
Rejected
The government disagrees with the Committee’s recommendation. The department is focused on consumer security by bringing bills down, keeping them affordable. The government took steps to shield consumers and companies from the worst effects of the rise in global energy prices, paying around half a typical household’s bill over winter 2022-23 and half the wholesale energy costs paid by some businesses. In March 2023, the Secretary of State noted that access to cheap, abundant and reliable energy provide the foundation stone of a thriving economy, with homes and businesses relying on it to deliver our future prosperity. Following the unprecedented cost of living support that winter, the Secretary of State noted that Powering Up Britain sets out how the government will fix this problem in the long term to deliver wholesale electricity prices that rank amongst the cheapest in Europe. A decarbonised power sector is a key step on the path to a low-cost, clean energy system by 2050. The impact of policy interventions on prices and bills is therefore a key factor in making decisions. Future costs are naturally subject to uncertainty, and the extent to which costs impact bill payers and taxpayers will depend on future policy decisions, as well as on factors such as the development of flexible and low-carbon generation technologies, and the evolution of global power markets. The government currently publishes information on cost impacts and estimates for specific policy interventions in Impact Assessments, and monitors energy prices, publishing regular updates via the series of Quarterly Energy Prices reports.