Source · Select Committees · Public Accounts Committee
Recommendation 20
20
Accepted
Energy bill support schemes prioritise cost reduction over encouraging demand efficiency
Conclusion
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
Government Response 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 the Carbon Budget Delivery Plan.
Government Response
Accepted
HM Government
Accepted
6.1 The government agrees with the Committee’s recommendation. Recommendation implemented 6.2 The department has modelled two potential scenarios to help estimate future power sector demands: the Net Zero Higher1 scenario, which explores the impact of using widespread electrification to support transport, heating, and industry decarbonisation; and the Net Zero Lower scenario, which explores the impact of using low-carbon hydrogen more extensively. Both scenarios take account of the underlying socioeconomic drivers of energy demand (such as GDP and population growth) and are consistent with the department’s Carbon Budgets and for achieving net zero emissions by 2050. Full details of the modelling and assumptions are in the technical annex to the Net Zero Strategy. 6.3 Through its range of sectoral models, the department then ensures it takes account of the policies and proposals required to achieve its net zero goals. While the policy mix in each scenario will depend on the net zero pathway taken, consumer choices and energy efficiency measures will play a significant role in achieving carbon savings. For instance, the high electrification scenario assumes high adoption of electric heat pumps and electric vehicles, while energy efficiency measures (such as insulation and more efficient appliances) reduce energy demand. The government’s policies aim to take into account consumer preferences and to follow natural replacement cycles, whilst supporting the infrastructure needed to make such transitions, and incentivising behavioural change. Full details are set out in the government's Carbon Budget Delivery Plan.