Recommendation 5

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.