Source · Select Committees · Business and Trade Committee
Eleventh Report - Decarbonisation of the power sector
Business and Trade Committee
HC 283
Published 28 April 2023
Recommendations
4
Deferred
Para 29
Publish comprehensive, long-term delivery plan for decarbonised power system by end of 2023.
Recommendation
We reiterate the calls of both the Climate Change Committee and National Audit Office for the Government to publish a comprehensive, long-term delivery plan for a decarbonised power system by 2035. The creation of a new Department for Energy Security …
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Government Response Summary
The government's response discusses ongoing work related to Contracts for Difference (CfD) auction parameters, budgets, and engagement with industry, but does not commit to publishing a comprehensive long-term delivery plan for a decarbonised power system by the end of 2023.
Department for Business and Trade
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5
Deferred
Para 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 …
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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.
Department for Business and Trade
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7
Accepted
Para 43
Introduce tailored capital allowance regime responses to attract investment in low-carbon energy projects.
Recommendation
The UK has become less attractive to energy investors. The UK is in a global race against larger markets to attract capital to decarbonise the economy. The US and EU have introduced a series of long-term tax incentives for clean …
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Government Response Summary
The government launched the Floating Offshore Wind Manufacturing Investment Scheme (FLOWMIS), worth up to £160 million, on March 30, 2023, to provide grant funding and leverage private investment in port infrastructure.
Department for Business and Trade
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8
Deferred
Para 47
Review Contracts for Difference Allocation Round 5 parameters to reflect rising costs for renewables developers.
Recommendation
There is a risk that the Government has not accurately reflected rising costs for renewables developers in the budget for this year’s Contracts for Difference auction, putting the viability of future projects into question. We recommend that the Government reviews …
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Government Response Summary
The government's response discusses the important role of onshore wind in achieving net zero targets and the reasons against setting a UK-wide target for its deployment. This completely deflects from the recommendation to review Contracts for Difference Allocation Round 5 parameters to accurately reflect rising costs for renewables developers.
Department for Business and Trade
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9
Deferred
Para 51
Equalise investment allowance rates for low-carbon electricity developers with oil and gas sector.
Recommendation
Providing that oil and gas companies utilise their investment allowances included in the Energy Profits Levy, oil and gas extraction will continue to benefit from a lower effective rate of marginal tax than low-carbon developers. This risks offering perverse incentives …
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Government Response Summary
The government's response discusses local decision-making for onshore wind sites and a consultation on changes to the National Planning Policy Framework, failing to address the recommendations regarding investment allowance rates for low-carbon developers or Voluntary Contracts for Difference.
Department for Business and Trade
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10
Acknowledged
Ensure a stable policy environment to de-risk investments in low-carbon energy infrastructure.
Recommendation
Recent policy and regulatory uncertainty has undermined investor confidence at precisely the time when the UK is looking to attract private investment in clean energy infrastructure. The Government should do its utmost to create and maintain a stable policy environment, …
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Government Response Summary
The government is looking into arrangements to support repowering renewable assets, considering planning frameworks for upgrading onshore wind farms and CfDs for repowering, with consultation responses due shortly or in due course.
Department for Business and Trade
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12
Deferred
Para 61
Publish plans for monitoring 50 GW offshore wind and Crown Estate social value oversight.
Recommendation
In response to this report, the Government should set out how it is monitoring progress against its ambition to deploy 50 GW of offshore wind by 2030. The Government should also set out how it will be responding to the …
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Government Response Summary
The government's response discusses the strategic case for nuclear power, the establishment of GBN, and cost management for projects like Hinkley Point C and Sizewell C. This completely deflects from the recommendation concerning monitoring offshore wind targets, responding to the UK Offshore Wind Champion, and ensuring oversight of Crown Estate decisions.
Department for Business and Trade
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13
Deferred
Para 66
Provide policy certainty for ports to de-risk investment in floating offshore wind infrastructure.
Recommendation
Floating offshore wind offers the potential to expand and diversify the UK’s portfolio of wind projects, including to the Celtic Sea. Significant new investment in UK ports will be needed to enable floating offshore wind to be deployed at scale …
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Government Response Summary
The government's response addresses plans to publish a nuclear roadmap and consult on a nuclear siting strategy later this year. This completely deflects from the recommendation to provide policy certainty to de-risk port investments for floating offshore wind infrastructure.
Department for Business and Trade
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14
Deferred
Para 77
Establish a UK-wide onshore wind target by 2035, informing an England-specific target.
Recommendation
The British Energy Security Strategy did not include a target for onshore wind, even though it is one of the cheapest and quickest sources of renewable electricity to deploy. We recommend that the UK Government works with the Scottish and …
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Government Response Summary
The government's response details investments through the Nuclear Fuel Fund to support the domestic nuclear fuel supply chain and a strategic civil nuclear partnership with the US. This completely deflects from the recommendation to agree a UK-wide target for onshore wind deployment.
Department for Business and Trade
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15
Deferred
Reclassify onshore wind projects as National Significant Infrastructure Projects if planning reforms fail.
Recommendation
We welcome the Government’s decision to review the National Planning Policy Framework but are concerned that the proposed changes do not go far enough to encourage the new onshore wind capacity the country needs. The planning system needs to give …
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Government Response Summary
The government's response details its £20bn investment in Carbon Capture, Utilisation, and Storage (CCUS), including selected projects and cluster sequencing, but does not address the recommendation regarding onshore wind planning or its classification as critical infrastructure.
Department for Business and Trade
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16
Deferred
Para 79
Introduce a framework supporting repowering and life extensions for existing onshore wind farms.
Recommendation
We are pleased that the Government is looking at how best to support repowered assets. Replacing old onshore wind turbines with new technologies will help reduce the need for new capacity elsewhere. The Government should introduce a framework which supports …
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Government Response Summary
The government's response describes Ofgem's investigation into Drax Power Limited and provides a general overview of the biomass industry and its sustainability criteria. This completely deflects from the recommendation to introduce a framework and planning presumption for repowering onshore wind farms.
Department for Business and Trade
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18
Deferred
Para 87
Reduced tidal stream funding ringfence may damage UK marine energy advantage.
Recommendation
We agree that the Government should seek to maximise the renewable opportunities afforded by the UK’s geography, including the potential benefits of tidal energy. Unlike offshore wind, tidal stream projects have not benefited from stable subsidies to bring their costs …
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Government Response Summary
The government's response discusses developing a business model for power BECCS and setting GHG thresholds, completely ignoring the recommendation about tidal energy funding.
Department for Business and Trade
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19
Deferred
Para 88
Justify reduced tidal stream funding and consider longer CfDs with a 1GW target.
Recommendation
The Government should justify the rationale for lowering the ringfenced amount of funding for tidal stream in the latest Contracts for Difference auction, and we invite the future Energy Security and Net Zero Committee to consider that rationale and to …
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Government Response Summary
The government's response states it plans to publish a Biomass Strategy and an updated bioenergy resource model, without addressing any aspect of the recommendation regarding tidal stream energy funding or targets.
Department for Business and Trade
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22
Deferred
Para 105
Mandate Government's nuclear roadmap to outline capacity, financing, and phasing options.
Recommendation
International examples suggest that the best way to bring the cost of nuclear energy generation down is to build a programme of new nuclear reactors, so that supply chains and skills can be developed and transferred from one project to …
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Government Response Summary
The government's response outlines guidance and standards for hydrogen production projects, committing to minimise leakage and monitor environmental impacts, without addressing the recommendation on the nuclear roadmap or Great British Nuclear.
Department for Business and Trade
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23
Deferred
Para 106
Maximise export potential and support critical domestic nuclear fuel cycle assets.
Recommendation
Aside from the need to import uranium, the UK has the capability to undertake critical parts of the nuclear fuel cycle, such as uranium conversion, enrichment and fuel fabrication. The export potential of these strategic assets should be maximised, especially …
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Government Response Summary
The government's response details its commitment to designing a hydrogen storage business model by 2025, progress on consultations, and legislative frameworks, along with existing funding programs for hydrogen projects. This completely deflects from the recommendation to support and maximise the export potential of the nuclear fuel cycle.
Department for Business and Trade
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24
Deferred
Para 121
Require Government to announce CCS cluster projects, clarify funding, and develop robust regulation.
Recommendation
The Government’s recent confirmation of £20 billion investment over 20 years for the early development of Carbon Capture and Storage (CCS) is welcome, allowing the implementation of the initial clusters to commence. However, none of this £20 billion is reflected …
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Government Response Summary
The government's response outlines its commitment to developing policy by 2024 to enable investment in large-scale, long-duration electricity storage (LLES) technologies. This completely deflects from the recommendations regarding Carbon Capture and Storage (CCS) cluster announcements, funding clarity, and regulatory regime development.
Department for Business and Trade
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25
Deferred
Mandate Ofgem to thoroughly investigate Drax biomass sourcing and report findings to committee.
Recommendation
The Committee has been concerned to hear reports about alleged misreporting by Drax to Ofgem in order to draw down public funds. We note that Ofgem has started a special audit process. We call on Ofgem to ensure a thorough …
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Government Response Summary
The government's response details investments in energy efficiency, plans for local energy planning, new consumer advice services, and work on improving EPCs, completely ignoring the committee's call for Ofgem to investigate alleged misreporting by Drax.
Department for Business and Trade
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29
Deferred
Para 137
Publish biomass strategy detailing demand assessment, domestic feedstock reliance, and supply scaling timeframe.
Recommendation
The Government was due to publish a biomass strategy last year, setting out the role of biomass in helping to achieve the Government’s net zero target, including whether biomass would be best used to generate electricity or for other purposes …
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Government Response Summary
The government's response focuses on accelerating new electricity network infrastructure and grid connections, including the work of the Network Commissioner and Ofgem's efforts, completely ignoring the recommendation to publish the biomass strategy.
Department for Business and Trade
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30
Deferred
Para 138
Establish robust contingency plans for BECCS viability and avoid unproven carbon removal technologies
Recommendation
We urge the Government to ensure that there is a robust contingency plan in place if BECCS proves unviable, either in terms of its sustainability or efficiency. We urge the Government not to rely upon unproven technologies at the expense …
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Government Response Summary
The government's response details its commitment to accelerate new electricity network capacity, manage grid constraints, and implement strategic network planning, without addressing the recommendation for a BECCS contingency plan.
Department for Business and Trade
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31
Deferred
Para 151
Develop cross-sectoral hydrogen infrastructure strategy and finalise business models this year
Recommendation
Hydrogen looks set to be an important part of a decarbonised power system, both as a source of low-carbon dispatchable power to replace gas and as a source of energy storage which can take advantage of excess supply of renewables. …
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Government Response Summary
The government's response details Ofgem’s streamlining of regulatory approval for Accelerating Strategic Transmission Investment projects and the appointment of an Electricity Networks Commissioner, without addressing the recommendation on hydrogen strategy or business models.
Department for Business and Trade
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33
Deferred
Para 153
Confirm hydrogen storage project deliverability by 2030 and outline the achievement strategy
Recommendation
Whilst the Government’s commitment to delivering hydrogen storage business models by 2025 is welcome, it appears that this could be too late to allow the development of hydrogen storage projects so that they are in operation in time to meet …
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Government Response Summary
The government's response details Ofgem's RIIO-ED2 price control, funding for electricity distribution network upgrades to support electric vehicles and heat pumps, and Ofgem's consultation on future network regulation, completely failing to address the recommendation regarding hydrogen storage delivery by 2030.
Department for Business and Trade
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35
Deferred
Para 159
Establish policy framework for long-duration energy storage investment and ensure sufficient staffing
Recommendation
We recommend that the Government establishes an appropriate policy framework to support investment decisions in long-duration energy storage this year, to enable projects to be completed by the end of the decade. This includes setting out a target range for …
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Government Response Summary
The government welcomes Ofgem's consultation on the future of local energy institutions and governance, stating it will engage with Ofgem to ensure appropriate arrangements are implemented, potentially legislating. However, it does not directly address the recommendation for a policy framework, targets, revenue stabilisation, or staffing for long-duration energy storage.
Department for Business and Trade
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36
Deferred
Bring forward energy efficiency funding, prioritise home retrofit, and reform the EPC rating system
Recommendation
Energy efficiency is the quickest and most cost-effective way to reduce gas demand and lower household energy bills. If significant strides are not made to reduce demand, it will become increasingly challenging and expensive to decarbonise 106 Decarbonisation of the …
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Government Response Summary
The government's response details Ofgem's mandate and the efficiency targets and funding allocated within electricity network price controls RIIO-ED2 and RIIO-T2, focusing on network costs, but does not address recommendations for energy efficiency funding, home retrofits, communications, or EPC reform.
Department for Business and Trade
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38
Deferred
Para 177
Resource planning bodies adequately and embed net zero targets into the planning system
Recommendation
The Government should ensure that bodies within the planning system (such as local authorities, the Planning Inspectorate, and the Marine Management Organisation) are adequately resourced to process and comment on applications faster. The Department for Energy Security and Net Zero …
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Government Response Summary
The Electricity System Operator's (ESO) response details its role in balancing the electricity network, integrating low-carbon technologies into the Balancing Mechanism, and monitoring carbon intensity, without addressing the committee's recommendations for resourcing planning bodies or embedding net zero targets in the planning system.
Department for Business and Trade
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39
Deferred
Para 178
Accelerate finalisation of National Policy Statements for Energy and align with future delivery plan
Recommendation
In December 2020, the Government confirmed that the National Policy Statements for Energy, which were published in 2011, would need to be updated to reflect our transition away from fossil fuels and towards cleaner, greener sources of energy. We are …
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Government Response Summary
The Electricity System Operator (ESO) and Ofgem's response describes the Demand Flexibility Service, its success during Winter 22/23, and ongoing evaluations for potential future rollout, entirely failing to address the committee's recommendation regarding the delayed finalisation and future alignment of National Policy Statements for Energy.
Department for Business and Trade
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40
Deferred
Para 179
Improve assessment and delivery of social value for communities hosting clean energy infrastructure.
Recommendation
Local communities who host critical clean energy infrastructure should benefit from doing so. We call on Government to work with the Crown Estate to use the upcoming licencing round for offshore wind in the Celtic Sea as an opportunity for …
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Government Response Summary
Ofgem's response details its work on distributed flexibility markets, including consultations on local energy institutions, governance, and developing digital infrastructure for these markets, completely ignoring the recommendation to work with the Crown Estate on improving social value from offshore wind projects in the Celtic Sea.
Department for Business and Trade
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44
Deferred
Para 189
Establish a Minister-led infrastructure delivery group to expedite national network infrastructure build at pace.
Recommendation
We recommend that Ofgem sees the Accelerated Strategic Transmission Investment (ASTI) framework as a starting point to accelerate the delivery of the necessary grid upgrades required to meet the Government’s 2035 target. This work should continue beyond 2035 to ensure …
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Government Response Summary
The government references its ongoing Review of Electricity Market Arrangements (REMA), which involved a first consultation in 2022 and a second planned for Autumn 2023, exploring options for market reform and locational signals. The response outlines a process of consultation and exploration, but does not directly commit to leveraging ASTI for grid upgrades or establishing a Minister-led infrastructure delivery group.
Department for Business and Trade
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45
Deferred
Para 194
Enable National Grid ESO to require projects meet strengthened grid connection milestones.
Recommendation
The UK’s “first come first served” approach to grid connections is failing to deliver the volume of connections required. Projects which may be speculative or slow-moving risk being prioritised over those that are more viable. While we welcome National Grid …
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Government Response Summary
The government highlights its consultation on the Strategy and Policy Statement (SPS) for Energy Policy and the establishment of the Future System Operator (FSO), which will manage electricity and gas networks. The response outlines these ongoing policy and structural developments, but does not directly commit to changing the 'first come first served' grid connection approach, strengthening project milestones, or requiring National Grid ESO to explain DNO collaboration.
Department for Business and Trade
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47
Accepted
Para 203
Require Ofgem to ensure RIIO-ED2 mechanisms enable distribution network investment for low-carbon rollout.
Recommendation
We recommend that when a need for investment in the distribution network becomes clear, Ofgem ensures the uncertainty mechanisms included in the RIIO-ED2 framework are applied efficiently. Should these prove inadequate to respond to a rapid roll-out of low-carbon technologies, …
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Government Response Summary
Ofgem states that its RIIO-ED2 framework already provides effective uncertainty mechanisms, including a Reopener mechanism, and an ability to accelerate investment for rapid low-carbon technology rollout, thus addressing the recommendation through existing provisions.
Department for Business and Trade
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48
Deferred
Para 204
Require Ofgem to revise distribution network planning to be more outcome-focused.
Recommendation
We are concerned by the risks that customers face different outcomes in different regions due to a lack of national direction setting for distribution networks. We recommend that Ofgem revises its approach to the planning of distribution networks to one …
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Government Response Summary
The government recognises the need for a strategic approach to network planning and notes that Ofgem has launched a consultation on local energy institutions, including proposed Regional System Planners. The government will engage with this review, expects Ofgem to publish a decision later this year, and will then consider proposals to improve coordination and standardise regional approaches.
Department for Business and Trade
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49
Accepted
Para 205
Network owners continue to be overly rewarded through current regulatory settlements.
Recommendation
Regulatory settlements for network owners must deliver value for money for consumers. Despite improvements from Ofgem in tackling excessive profits made by these companies in previous price control frameworks, we are concerned that network owners continue to be overly rewarded. …
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Government Response Summary
The government states that Ofgem's current price controls (RIIO-ED2 and RIIO-T2) already include stringent efficiency targets, lower allowed returns, and mechanisms to share outperformance with consumers, addressing concerns about value for money and excessive profits. They also highlight funding for data and digitalisation to improve network visibility.
Department for Business and Trade
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50
Acknowledged
Para 206
Introduce rigorous annual performance processes for network owners and publicise information for engagement.
Recommendation
We recommend that Ofgem consults on how best to address the asymmetries in resources and knowledge between network companies and other stakeholders, such as consumer groups, which influence processes such as price controls. We recommend that Ofgem introduces a more …
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Government Response Summary
Ofgem acknowledges the importance of addressing asymmetries in resources and knowledge, outlining its sustained engagement process in price controls and future measures in the Energy Bill. However, it does not commit to consulting on the issue or introducing a new rigorous annual performance process for network owners.
Department for Business and Trade
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51
Accepted in Part
Require National Grid ESO to open markets, report carbon footprint, and plan for 2035 decarbonisation.
Recommendation
National Grid ESO’s markets for balancing the system and addressing constraints continue to be dominated by fast-acting gas plants. More flexible and responsive low-carbon assets, such as batteries, could lead to greater competition in National Grid ESO’s markets and offer …
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Government Response Summary
The ESO acknowledges the importance of integrating low-carbon technologies but notes its current licence prevents considering technology type in decision-making. It states that carbon intensity for the Balancing Mechanism is already monitored and published, and it will consider how markets must evolve to align with its 2025 net zero target.
Department for Business and Trade
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52
Acknowledged
Para 216
Require National Grid ESO to provide clearer signals on future energy constraint location, value, duration.
Recommendation
Despite welcome progress by National Grid ESO to develop and implement new initiatives to harness flexibility, there is still more to be done to ensure that clear signals are provided regarding the location, duration and value of future constraints. We …
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Government Response Summary
The ESO understands the importance of integrating low carbon technologies and will consider how markets must evolve to facilitate more low-carbon technologies contributing to system balancing and stability, while actively monitoring the carbon intensity of the Balancing Mechanism.
Department for Business and Trade
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53
Deferred
Para 217
Mandate National Grid ESO and Ofgem to develop transitional demand-side response services with industry.
Recommendation
To build on the success of the Demand Flexibility Service and ensure that demand- side response can become mainstream, the industry needs the opportunity to do more learning by doing. While necessary system reforms take place to create a more …
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Government Response Summary
ESO is currently evaluating the existing Demand Flexibility Service with industry participants and consumers, with outcomes to be published later in the summer to inform its future evolution. Ofgem will support this review for a potential further rollout for winter 2023/24.
Department for Business and Trade
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54
Accepted
Para 218
Mandate Ofgem to pressure the ENA and DNOs for faster Open Networks Programme implementation.
Recommendation
At present, flexibility markets are disjointed and difficult to navigate, impeding the participation of small assetsand reducing the value of distributed flexibility. While Ofgem should be commended for its proposals for a single digital flexibility platform, this should not distract …
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Government Response Summary
Ofgem strongly agrees with the need for faster progress, stating it is driving DSO capabilities through incentives and working closely with the ENA and DNOs to ensure the Open Networks programme is delivered at pace.
Department for Business and Trade
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55
Acknowledged
Para 220
Accelerate National Grid ESO IT upgrades to handle sub-1MW flexibility and report progress to Parliament.
Recommendation
To unlock the potential role that flexibility can play in better synchronising supply and demand, National Grid ESO will need to improve its digital capabilities. We recommend that National Grid ESO speeds up progress on making sure its IT upgrades …
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Government Response Summary
The ESO acknowledges the need for investment in systems and states it is modernising balancing capabilities through its Open Balancing Program. However, it does not specifically commit to handling assets smaller than 1MW or reporting progress to Parliament.
Department for Business and Trade
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56
Accepted
Para 223
Mandate Ofgem to intervene on DNO visibility standards and monitor 'Flexibility First' adherence.
Recommendation
In future, data and visibility will be key to ascertaining whether network reinforcement or an alternative, such as procuring flexibility services, would be most cost effective for consumers. But there has been insufficient investment in monitoring capability at low voltages …
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Government Response Summary
Ofgem agrees with the recommendation, stating it has approved £167.54m for Distribution Network Operators (DNOs) to roll out Low Voltage (LV) network monitoring. Ofgem also clarifies that its DSO incentive framework within RIIO-ED2 includes evaluation criteria and a new smart optimisation output to monitor DNO performance in developing flexibility and using smart solutions.
Department for Business and Trade
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57
Deferred
Para 227
Mandate government prioritisation of retail market reform and an updated Energy Retail Market Strategy.
Recommendation
The current regulatory and market structures of the retail sector will not deliver a consumer experience that can adequately support the transition to decarbonised power system. We recommend that the Government prioritises the reform of the retail market and that …
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Government Response Summary
The government recognizes the retail market's importance and will pursue reforms by launching a Call for Evidence in summer 2023, followed by a consultation later in 2023, to determine how the framework should evolve.
Department for Business and Trade
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58
Accepted
Para 237
Ensure wholesale electricity market reforms avoid an investment hiatus, protecting the 2035 target.
Recommendation
We agree that the wholesale electricity market arrangements need reform to help decarbonise power in a way that secures supply and ensures the system can function efficiently, including more locational signals. In principle, we find the argument for locational pricing …
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Government Response Summary
The government confirms it is actively reviewing electricity market arrangements (REMA), with a second consultation due in Autumn 2023. It has updated its assessment criteria to include "Investor Confidence" and explicitly commits to ensuring that renewable generation investment is not unduly affected by any reforms.
Department for Business and Trade
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59
Accepted
Provide a clear pathway on wholesale market arrangements evolution by Government before end 2023.
Recommendation
We recommend that the Government provides before the end of 2023 a clear pathway on how wholesale market arrangements will evolve following its consultation. There are a number of constructive steps that the Government could make to the existing market …
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Government Response Summary
The government aims to publish a second consultation on the Review of Electricity Market Arrangements (REMA) in Autumn 2023. This consultation will set out a direction of travel and next steps for the evolution of wholesale market arrangements.
Department for Business and Trade
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60
Accepted
Para 240
Add explicit net zero duty to Ofgem's remit and publish updated Strategy and Policy Statement.
Recommendation
Even though we urged the Government to publish its already very delayed Strategy and Policy Statement for Ofgem back in July 2022, it has still not materialised. We recommend that an explicit duty to deliver on the statutory net zero …
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Government Response Summary
The government published its consultation on the Strategy and Policy Statement for Energy Policy in May 2023 and is content to amend Ofgem's existing duty to explicitly reference the net zero targets from the Climate Change Act 2008.
Department for Business and Trade
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62
Accepted
Grant Future System Operator sufficient powers and resources, including clear net zero directive.
Recommendation
The Future System Operator (FSO) should be granted sufficient powers and resources to effectively plan and co-ordinate the transformation of the electricity system. The FSO should be given a clear net zero directive within its governance arrangements. In response to …
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Government Response Summary
The government confirms the FSO will have a net zero objective enshrined in the Energy Bill, aims for the FSO to be operational in 2024, and will publish a framework outlining institutional responsibilities between Ministers, Ofgem, and the FSO. It also notes the select committee will be able to invite FSO leadership to sessions.
Department for Business and Trade
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65
Accepted in Part
Ensure planning authorities are properly resourced and streamline processes for 2035 target.
Recommendation
To address the delivery risks to the 2035 target, the Government will need to ensure that planning and environmental authorities are properly resourced, that planning guidance is aligned with its decarbonisation goals and that the process is streamlined. Ofgem needs …
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Government Response Summary
The government supports Ofgem’s approach to investing ahead of need, detailing £30bn, £22bn, and an additional £10bn in approved network investments. It agrees on the need to reform the grid connection process and is working with Ofgem/ESO, and states that Ofgem is evaluating the Demand Flexibility Service for potential further rollout.
Department for Business and Trade
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Conclusions (21)
1
Conclusion
Accepted
Para 24
To deliver the Government’s target to decarbonise the power system by 2035, the UK needs to deploy low-carbon technologies at a faster rate than has been achieved historically. A whole host of regulatory and policy barriers continue to impede the deployment of clean technologies. The evidence submitted to our inquiry …
Government Response Summary
The government will report annually on its delivery of power sector decarbonisation and strengthen its portfolio management approach to provide a 'whole system' view and manage uncertainties.
2
Conclusion
Accepted
Para 25
The level of coordination and pace of delivery needed requires the Government to operate in a different way than it has in the past. We welcome the creation of the new Department for Energy Security and Net Zero, but that Department must now act to coordinate stakeholders, unlock bottlenecks, and …
Government Response Summary
The government outlines its overall energy strategy for 2035, referencing existing plans like the Net Zero Strategy and Energy Security Plan. It describes the overall goal and existing strategies but does not detail how the new Department for Energy Security and Net Zero will specifically operate differently to coordinate stakeholders and accelerate delivery as recommended.
3
Conclusion
Deferred
Para 28
An overarching delivery plan for the decarbonisation of power, with clear milestones and contingencies, will help the Government bring a complex set of interrelated tasks together. At the moment, decisions are taken on specific technologies or issues in silos without a roadmap for the whole system. This has led to …
Government Response Summary
The government, through HM Treasury, focuses on monitoring the impact of international subsidies and leveraging capital allowances to support green industries, committing to engage with industry on tax incentives. It does not commit to developing an overarching delivery plan with clear milestones and contingencies for power decarbonisation as recommended.
6
Conclusion
Deferred
Announcements by major oil and gas companies to prioritise share buybacks and dividends over investment in renewables, and to scale back on targets to reduce the impact of their operations on the climate in favour of extracting more fossil fuels, suggest that the industry has some way to go before …
Government Response Summary
The government's response discusses a consultation on community benefits for network infrastructure, coordination with The Crown Estate on transmission links, and tracking offshore wind capacity, but does not address making taxpayer support for oil and gas companies contingent on their transparency or decarbonisation plans.
11
Conclusion
Deferred
Para 60
The UK’s offshore wind sector is a success story. The Government has ambitious plans to scale up offshore wind deployment, maximising the potential of the UK’s natural resources. However, unless rapidly addressed, current bottlenecks in the process will stand in the way of the Government achieving its ambition for 50 …
Government Response Summary
The government states it continues to assess the merits of a long-term target for tidal stream deployment and recognizes the need for tailored subsidy mechanisms for tidal range, subject to value for money and evidence from proposed schemes, rather than addressing offshore wind bottlenecks.
17
Conclusion
Deferred
Para 83
The Government’s aim for 70 GW of solar capacity to be installed by 2035 is welcome. Achieving this goal will require the UK to ramp up the pace at which new solar capacity is deployed. We therefore welcome the Government’s announcement of a solar roadmap and the establishment of a …
Government Response Summary
The government's response discusses its commitment to developing a business model for power BECCS and its support for existing biomass generating stations, rather than addressing the committee's welcome for solar capacity targets or the solar roadmap.
20
Conclusion
Deferred
Para 103
The British Energy Security Strategy set an ambition for the UK to deploy 24 GW of civil nuclear power by 2050. This significantly raised the level of the Government’s ambition on nuclear power, above estimates suggested by the Climate Change Committee and others. But to be an effective part of …
Government Response Summary
The government's response highlights the importance of Greenhouse Gas Removals (GGRs) like BECCS for net zero and outlines deployment ambitions, ignoring the conclusion about nuclear power costs.
21
Conclusion
Deferred
Para 104
In response to this report, we request that the Government sets out: a) its current estimates of the total cost of delivering the Government’s 24 GW ambition; b) its latest official estimate of the total cost of Sizewell C and Hinkley Point C; Decarbonisation of the power sector 103 c) …
Government Response Summary
The government's response details plans to publish standard terms for the low carbon hydrogen production business model and to design new transport and storage business models, completely ignoring the request for information on nuclear power costs and financing.
26
Conclusion
Deferred
Para 134
The UK’s biomass industry is a diverse sector made up of large-scale power plants through to smaller-scale, more local, generators. The overall costs of large-scale bioenergy power plants, which converted from coal-fired plants, are very expensive and rely heavily on imported feedstocks, which may not be produced sustainably, and which …
Government Response Summary
The government's response outlines its Action Plan for reforming the planning system for Nationally Significant Infrastructure and plans to publish a consultation document. This completely deflects from the committee's conclusion regarding the costs, sustainability, and value for money of the UK's biomass industry.
27
Conclusion
Deferred
Para 135
We believe that there should be no extension beyond 2027 for taxpayer support for unabated bioenergy plants, and that the aim should be to phase out such plants in favour of more sustainable alternatives as soon as possible. This could include bioenergy with carbon capture and storage but only in …
Government Response Summary
The government states that its energy National Policy Statements (NPSs) are undergoing a second round of consultation, after which responses will be considered, finalised, and presented to Parliament by the end of the year, deflecting the specific recommendations on bioenergy subsidies to this broader process.
28
Conclusion
Deferred
Para 136
Bioenergy with carbon capture and storage has yet to be commercially deployed in the UK. We have concerns about whether biomass feedstocks can be scaled up sustainably to meet domestic and global demand and whether BECCS facilities will provide value for money. To ensure sufficient oversight of sustainability standards, the …
Government Response Summary
The government's response outlines plans to introduce recommended funding for community benefits from electricity transmission infrastructure and discussions on supply chain development, without addressing the committee's conditions for future taxpayer support for BECCS.
32
Conclusion
Deferred
Para 152
Blue hydrogen may have value as a transitional measure which builds a market for hydrogen and provides supply over the shorter term. However, excess reliance on blue hydrogen could leave the UK exposed to volatile international gas prices and risk increasing greenhouse gas emissions due to the threat of methane …
Government Response Summary
The government's response focuses entirely on improving electricity network connections and reducing connection timescales, including an upcoming Connections Action Plan, without addressing the committee's questions about blue hydrogen, hydrogen emissions, or methane leakage.
34
Conclusion
Deferred
Para 158
The deployment of long-duration energy storage is essential to ensuring that a zero- carbon power system can operate 24/7, 365 days a year. These projects are capital intensive and face barriers to deployment due to a lack of long-term market signals. The Government’s 2024 ambition to develop appropriate policy to …
Government Response Summary
The government's response highlights Ofgem's RIIO-ED2 price control mechanisms, including flexible funding and enabling strategic investment for network needs. However, it does not directly address the committee's concern about the prioritisation of specific long-duration energy storage policy.
37
Conclusion
Deferred
Para 176
The planning system, nationally and locally within England and also in Scotland and Wales, is a major constraint on the timely delivery of low-carbon energy infrastructure. There are many reasons for this, some of which we do not cover in this report, and we acknowledge the need for effective controls …
Government Response Summary
Ofgem's response describes its stakeholder engagement and consultation processes for the RIIO-ED2 price control, aiming to ensure fair price controls and minimise information asymmetry. This addresses network investment regulation rather than the committee's observation about planning system constraints on low-carbon energy infrastructure.
41
Conclusion
Accepted
Para 186
A lack of network capacity and delays to securing grid connections are together hampering the delivery of low-carbon power and driving potential investments overseas. For too long, transmission and distribution network owners have been able to delay or avoid the level of anticipatory investment required to deliver a network capable …
Government Response Summary
The Electricity System Operator (ESO) acknowledges the need for investment in its systems and details its ongoing Open Balancing Program to modernise balancing capabilities and IT platforms, aiming to increase flexibility and market participation for a net-zero electricity system. This describes internal ESO work rather than directly addressing systemic network capacity issues or Ofgem's investment approach.
42
Conclusion
Accepted
Para 187
We join many other organisations from across the sector in calling on Ministers, Ofgem and network owners to help recover lost ground by accelerating investment in future grid capacity now ahead of need. The increasing costs associated with turning off generation sites due to a lack of transmission capacity must …
Government Response Summary
The government details how Ofgem's RIIO-ED2 price control, which commenced in April 2023, along with measures like LV monitoring capacity and the DSO incentive, aim to unlock network capacity and support smart technologies. This response outlines existing or recently implemented policies rather than new commitments to accelerate grid investment ahead of need.
43
Conclusion
Deferred
Para 188
There has been a clear lack of strategic planning and coordination of energy infrastructure and network upgrades. A failure to plan from a whole system perspective risks increasing the overall costs of the transition. We welcome the more strategic approach emerging following National Grid ESO’s Holistic Network Design and Ofgem’s …
Government Response Summary
The government will launch a Call for Evidence in summer 2023, followed by a consultation later in 2023, on how the energy retail market framework needs to evolve. This response focuses on retail market reforms rather than strategic planning of energy infrastructure or competition in onshore networks, which was the focus of the recommendation.
46
Conclusion
Deferred
Para 202
The RIIO-ED1 process, which set the amount network operators could charge energy bill-payers for making upgrades to the grid over the period 2015–2023, proved overly generous. Distribution Network Operators were able to either build 108 Decarbonisation of the power sector more infrastructure that is rewarded through the Regulated Asset Value, …
Government Response Summary
The government details the establishment of the Future System Operator (FSO), aiming for it to be operational in 2024 with a duty to promote net zero. It will also create a framework agreement outlining FSO's relationships. This response focuses on the FSO's role rather than Ofgem's management of the RIIO-ED2 process or uncertainty mechanisms for network investment.
61
Conclusion
Accepted
Para 243
The Future System Operator (FSO) is expected to provide strategic oversight of the planning and coordination of the power system, but there is a still a lack of clarity over its specific roles, responsibilities and powers, as well as how it will interact with the Government and Ofgem. It is …
Government Response Summary
The government outlines that the FSO will have necessary powers via the Energy Bill, with Ofgem regulating its functions, performance, and funding. It commits to creating and publishing a framework agreement to clarify roles between ministers, Ofgem, and the FSO, with the FSO aiming to be operational in 2024.
63
Conclusion
Accepted
Para 245
While huge strides have been made by the Government and industry over the last decade to tackle emissions in the power sector, the UK must continue to accelerate its shift away from fossil fuels to clean energy. However, a suite of policy and regulatory barriers are blocking progress to achieving …
Government Response Summary
The government acknowledges the benefit of a more overarching approach and commits to annual reporting on decarbonisation delivery. It will also strengthen its portfolio management to adopt a "whole system" view across its delivery work.
64
Conclusion
Acknowledged
Para 246
The UK investment proposition for the electricity sector has deteriorated since the launch of our inquiry. The global race for capital in low-carbon projects has intensified. Meanwhile developers of renewables projects in the UK are experiencing substantial cost inflation and are subjected to a windfall tax less generous than that …
Government Response Summary
The government states it will not engage in a distortive subsidy race, but expects current capital allowance changes to support green industries and will engage with industry on incentives. It is also considering using Contracts for Difference for operational generators as part of the wider REMA.