Source · Select Committees · Public Accounts Committee
Fifty-Ninth Report - Decarbonising the power sector
Public Accounts Committee
HC 1003
Published 21 June 2023
Recommendations
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 …
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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.
HM Treasury
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4
Accepted
Set out strategies to influence other departments for power sector decarbonisation collaboration.
Recommendation
It is not clear the Department has the support it needs from other departments to achieve government’s power sector decarbonisation ambition. While it holds responsibility for, and takes the lead for achieving energy security and net zero, the Department nevertheless …
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Government Response Summary
The government states it already has robust governance and reporting processes at ministerial and official levels, including various committees and groups, to ensure cross-departmental collaboration and prioritization for power sector decarbonisation.
HM Treasury
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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 …
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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.
HM Treasury
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Conclusions (20)
2
Conclusion
Accepted
We are sceptical that plans for expanding nuclear, solar and wind power are credible. Government has set itself highly challenging electricity generating capacity ambitions for nuclear (24GW by 2050), solar (70GW by 2035) and offshore wind power (50GW by 2030). By comparison, the UK’s current operating capacity is less than …
Government Response Summary
The government agrees with the recommendation but states it already provides annual updates to Parliament through its responses to the Climate Change Committee's annual Progress Reports and other departmental publications.
6
Conclusion
Accepted
We are not yet clear what the Department’s plans are in respect of energy efficiency and consumer behaviour. The Department acknowledges that improving energy efficiency and changing consumer behaviour are key to meeting net zero. However, recent energy bills support schemes have prioritised reducing costs to consumers over encouraging reduced …
Government Response Summary
The government states it has already modelled two scenarios (Net Zero Higher and Lower) and that full details of its modelling, assumptions, and how policies reflect energy efficiency and consumer behaviour are set out in the technical annex to the Net Zero Strategy and the Carbon Budget Delivery Plan.
1
Conclusion
Acknowledged
On the basis of a report by the Comptroller and Auditor General, we took evidence from the Department for Energy Security and Net Zero (the Department) about decarbonising the power sector.1
Government Response Summary
While responding to a conclusion, the government outlines its 'whole system' approach to power sector decarbonisation and states it intends to publish a short overarching plan later in the year to coherence its various policies.
7
Conclusion
Not Addressed
In the last two decades, government has only agreed one nuclear project, at Hinkley Point C.18 The government is now creating Great British Nuclear to help it build capacity and expertise, and a regulatory regime aimed at expanding its nuclear pipeline and help it 7 Department for Business, Energy & …
Government Response Summary
The government states it agrees with the recommendation and provides annual updates to Parliament through responses to the Climate Change Committee’s reports and other publications. The response does not address the committee's observation regarding the efficiency or speed of the nuclear regulatory system.
8
Conclusion
The Department also told us that it is tracking offshore wind projects at various stages of development that could produce 80GW of electricity when operating, more than its 50GW ambition. However, it acknowledged that not all these projects would succeed. It told us that it has established an offshore wind …
9
Conclusion
Accepted
The government estimated in its 2021 Net Zero Strategy that £280 to £400 billion of public and private investment in new generating capacity would be needed by 2037 to decarbonise the power sector. These costs represent the construction costs for power generation only, and do not include the costs for …
Government Response Summary
The government agrees with the committee's observation, recognizing the importance of clear plans for private investment. It has published several strategies, committed £20 billion for CCUS, launched annual Contracts for Difference rounds, and is producing sector-specific investment roadmaps to provide investor clarity.
10
Conclusion
Accepted
The Department told us that its role is to enable competition to drive innovation and cost reduction, and that the best example of this is how contracts for difference have sustained investment and innovation from the private sector in offshore wind. It told us that costs fell far faster and …
Government Response Summary
The government agrees and aims to provide clarity to the private sector to encourage investment by publishing the 2023 Green Finance Strategy and other plans. These initiatives include £20 billion for CCUS, annual Contracts for Difference rounds, and sector-specific investment roadmaps to boost investor confidence.
11
Conclusion
Accepted
At the 2023 Spring Budget, the Chancellor announced £20 billion for carbon capture, usage and storage (commonly referred to as CCUS).32 However, while providing a signal to the sector and investors, this technology is untested at scale in the UK. The Department acknowledges that its current ambition for CCUS to …
Government Response Summary
The government accepts the committee's observation, stating a target implementation date of December 2023, and details its efforts to provide clarity and encourage investment through recent publications, £20 billion funding for CCUS, and plans to publish further sector-specific roadmaps later in 2023.
12
Conclusion
Accepted
More generally, changes in policy direction can affect investor confidence in government.36 Energy policy instability, such as the stop-start nature of some initiatives like the Green Homes Grant Voucher Scheme, which was extended and then abruptly closed, have eroded investor confidence in government.37 In March 2022 we highlighted that, in …
Government Response Summary
The government agrees with the committee's observation and has published the 2023 Green Finance Strategy, Net Zero Growth Plan, and Energy Security Plan to provide clarity and encourage investment. These plans include £20 billion for CCUS, annual Contracts for Difference rounds, and sector-specific investment roadmaps.
13
Conclusion
Accepted
On 7 February 2023, the government announced that the Department for Business, Energy & Industrial Strategy (BEIS) would close, and its responsibilities would transfer to new departments, including the Department for Energy Security & Net Zero (the Department).39 The Department therefore takes the lead for energy security and net zero, …
Government Response Summary
The government states the recommendation has been implemented, describing its existing robust governance and reporting processes at both ministerial and official levels, including regular inter-departmental meetings, to ensure collaboration and alignment across government departments on decarbonising the power sector.
14
Conclusion
Accepted
The Department has created offshore wind, hydrogen, electricity network, and nuclear champions whose role includes identifying potential risks, barriers and bottlenecks to progress and making recommendations for both the Department and other parts of government where issues cross departmental responsibilities. Planning permission and skills in the workforce are two relevant …
Government Response Summary
The government agrees with the committee's observation, stating the points raised are already implemented through existing robust governance and cross-departmental processes to coordinate action across relevant departments.
15
Conclusion
Accepted
The Department told us that it is essential that it builds strong partnerships and collaborative relationships with relevant departments across Whitehall, and that it works with No. 10 and the Cabinet Office to ensure that departments are aligned.48 However, other departments and organisations have their own issues and competing ambitions.49 …
Government Response Summary
The government states the recommendation has been implemented, detailing its existing robust governance and reporting processes, including ministerial and official level committees, to ensure collaboration and alignment across departments on decarbonising the power sector.
16
Conclusion
Rejected
While government has estimated that £280 to £400 billion of public and private investment in new generating capacity will be needed by 2037, it has not yet assessed when there may be periods of higher spending and how this will be paid for, particularly if consumer bills remain high due …
Government Response Summary
The government rejects the committee's observation, stating its focus on consumer security, affordable bills, and its current approach to policy decisions, cost impacts, and monitoring energy prices.
17
Conclusion
Rejected
We questioned the Department as to how it is planning to protect consumers and taxpayers from the cost of decarbonising the power sector, particularly when a challenge of proceeding quickly is that deploying nascent technologies before there is a competitive market for them, requires taxpayer support. The Department told us …
Government Response Summary
The government rejects the committee's observation, outlining its focus on consumer security by reducing and affording bills and describing its approach to managing policy interventions, cost impacts, and monitoring energy prices.
18
Conclusion
Rejected
Although the Department was unable to tell us when bill payers would see lower bills as a result of investment in zero and low-carbon generating infrastructure, it highlighted recent analysis by Ofgem that renewables funded by contracts for difference are reducing annual household bills by an average of £54.57 However, …
Government Response Summary
The government explicitly disagrees with the committee's (implied) recommendation, stating its focus is on consumer security by bringing down bills. It highlights past support schemes and its long-term strategy, Powering Up Britain, to deliver wholesale electricity prices amongst the cheapest in Europe.
19
Conclusion
Rejected
The Department is also currently considering fundamental market reform of how electricity is bought and sold, through which it hopes to reduce costs of electricity to consumers over the long term. The Department expects reform of the retail market to result in more scope for suppliers to offer flexible tariffs, …
Government Response Summary
The government rejects the committee's observation, stating its focus is on consumer security by reducing and affording bills, and explaining its approach to policy interventions, cost impacts, and monitoring energy prices.
20
Conclusion
Accepted
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 …
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.
21
Conclusion
Accepted
We asked the Department about its plans to encourage consumers, industry and households to invest in greater energy efficiency. It told us that this is an important aspect of its strategy, which includes encouraging short-term demand flexibility from consumers to use less electricity at times of peak demand (by, for …
Government Response Summary
The government agrees with the committee's observation, stating the points raised are already implemented through existing strategies that use modelling scenarios and policies to encourage energy efficiency and consumer behavioural change, as detailed in their Carbon Budget Delivery Plan.
22
Conclusion
Accepted
In its 2022 Autumn Statement the Chancellor announced new funding of £6 billion from 2025 to 2028 to improve energy efficiency for households, business and the public sector. The Chancellor announced that an Energy Efficiency Taskforce would be charged with improving energy efficiency in the UK by reducing energy consumption …
Government Response Summary
The government agrees with the committee's observation, stating the points raised are already implemented through its existing strategies that use modelling scenarios and policies to encourage energy efficiency and behavioural change, as detailed in the Carbon Budget Delivery Plan.
23
Conclusion
Accepted
We also asked the Department about how government can influence consumer behaviour. The Department told us that its modelling of power sector decarbonisation by 2035 covers different pathways characterising different assumptions of consumer behaviour and energy efficiency (such as home storage), but acknowledged that it does not know which of …
Government Response Summary
The government states the recommendation has been implemented, explaining its existing Net Zero Higher and Lower modelling scenarios that estimate future power demands and consider consumer choices and energy efficiency. Government policies are designed to incorporate these factors and incentivise behavioural change.