Source · Select Committees · Business and Trade Committee
Recommendation 5
5
Deferred
Paragraph: 31
Define 'security of supply' and clarify acceptable residual emissions for power decarbonisation target.
Recommendation
The Government has set a target to decarbonise the power system by 2035, subject to security of supply. The Government has not defined ‘security of supply’. After 2035, there may be rare occasions when the UK needs to use unabated gas-fired stations to meet shortfalls in supply. A clear definition of ‘security of supply’ is needed to ensure that the Government can be properly held to account for its performance against the 100 Decarbonisation of the power sector 2035 target. The Government should define the ‘subject to security of supply’ condition in its 2035 target and clarify the amount of residual emissions from unabated gas plants that it is willing to accept from 2035 onwards.
Government Response Summary
The government is undertaking further work and assessing options as part of the wider Review of Electricity Market Arrangements (REMA) but does not provide a definition of 'security of supply' or clarify residual emissions from unabated gas plants.
Paragraph Reference:
31
Government Response
Deferred
HM Government
Deferred
13. [Response provided by HMT] The Government continues to provide considerable support for investment in renewables. Since March 2021, the Government has committed a total of £30 billion of domestic investment for the green industrial revolution. 14. As the committee notes, investors in low-carbon technology are able to deduct the costs of investment from their Corporation Tax liabilities. At Budget 2023, the Government introduced Full Expensing, which allows companies to write off 100% of the cost of qualifying main rate plant and machinery in the year of investment until March 2026. Companies investing in special rate (including long life) assets will also benefit from a 50% first-year allowance during this period. 15. The Electricity Generator Levy is an exceptional and time-limited measure, which has a fundamentally different design to the Energy Profits Levy applied to the oil and gas sector. 16. The EGL has been designed to leave generators with a share of the upside they receive at times of high wholesale prices which they can use to invest in the clean energy generation we need for the future. 4 Decarbonisation of the power sector: Government Response 17. Under the Energy Prices Act 2022, the Government took powers to allocate Contracts for Difference (CfDs) to operational low-carbon generators. 18. The Government is undertaking further work to consider whether this could help to limit consumer bills and support investment in low-carbon generation. The option to offer a CfD to operational generators is one of a series of options being assessed as part of the wider Review of Electricity Market Arrangements (REMA) in DESNZ. An update will follow in due course. 19. [Additional Input by DESNZ] Instruments like the Contracts for Difference (CfD) scheme make the UK an attractive place to invest in green industries. Over the last decade, the UK has developed a tremendous record for attracting investment into green industries through a range of financing mechanisms, policy and market frameworks and targeted public investment, and we are determined to build on this. Routes to managing electricity supply and demand