Source · Select Committees · Public Accounts Committee
Recommendation 24
24
Accepted
UK's reliance on natural gas results in highest energy bill support in Europe
Conclusion
Analysis from the Office for Budget Responsibility concluded that the size of the government’s financial support for energy bills (relative to Gross Domestic Product) was one of the highest in Europe because of the UK’s reliance on natural gas.69 The Department highlighted to us the importance of its clean power mission in “getting us off the rollercoaster” of international fossil fuel markets and volatile prices.70 It told us the deployment of, for example, low carbon renewable electricity will reduce the UK’s reliance on gas.71
Government Response Summary
The government secures electricity security via the Capacity Market (CM), assessing capacity annually and securing it in advance, while also addressing the variable nature of renewables by relying on unabated gas and working with the market to understand the capacity provided by nuclear. DESNZ and NESO have worked to update response and communications procedures, and the National Emergency Plan will be updated later this year.
Government Response
Accepted
HM Government
Accepted
6.1 The government agrees with the Committee’s recommendation. Recommendation implemented: June 2025 6.2 The Capacity Market (CM) is the department’s primary mechanism to ensure supply meets demand and delivers electricity security. An assessment is made annually of the capacity required to meet peak demand in four years’ time and, through the CM, the majority of capacity is secured well in advance. The rest is secured one year in advance, based on the latest demand forecasts. This ensures the grid has enough capacity available to meet the statutory Reliability Standard, which is the department’s measure of adequate levels for security of supply. 6.3 The variable nature of renewables makes it critical that the grid has sufficient flexible capacity that can be ramped up quickly when renewable generation is low. The UK continues to rely on unabated gas as the main mature, reliable technology capable of providing long duration flexibility when necessary. 6.4 Other technologies like nuclear provide important baseload capacity and the department works closely with the market to understand how the capacity provided by nuclear may change as reactors come on and offline. 6.5 The department is currently focused on maintaining existing flexible capacity to ensure security of supply, and will be implementing a number of changes to the next CM auctions to: a. Support the economic case for investment in ageing plants by making it easier for plants to access three-year 'refurbishing' CM agreements. b. Introduce pathways to allow unabated gas plants to transfer from the CM to a Dispatchable Power Agreement, enabling conversion to power generation with carbon capture and storage. This aims to reduce investor concerns about plants becoming stranded assets. 6.6 The government agrees with the Committee’s recommendation. Target implementation date: December 2025 6.7 The National Energy System Operator (NESO) is responsible for balancing electricity supply and customer demand on a second-by-second basis. During periods of electricity supply issues, such as tight electricity margins, NESO are responsible for all operational actions and communicating these actions with the public. 6.8 While NESO is operationally independent from government, it is important DESNZ and NESO work together to ensure consistent and clear messaging during periods of supply issues. Following the Electricity Margin Notice (EMN) in January 2025, DESNZ and NESO have worked to update response and communications procedures, applying learnings to: • Build in more educational content and consider different audiences - providing clear explanations of any supply issue to prevent the spread of misinformation. • Reframe communication lines to highlight upfront that there continues to be enough electricity to meet demand in the presence of live market notices. 6.9 Plans and process for how supply issues are managed and reported between NESO and DESNZ are set out in the National Emergency Plan 2023: Downstream gas and electricity, which is published on GOV.UK. Following winter 2024-25 and learnings from incidents including the January Electricity Margin Notice (EMN), Storm Darragh and Eowyn and the fire at North Hyde Substation which saw the closure of Heathrow airport, the NEP will be updated by DESNZ later this year (2025) to ensure it remains an accurate summary of the department’s response procedures.