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A new wide-ranging report  from the Industry and Regulators Comittee examines the substance of the government’s Net Zero Strategy, concluding that more needs to be done to ensure the success of the energy transition and maintain fair prices for consumers. The report identifies regulatory barriers to innovation, lack of sufficient policies and governance structures, as well as concerns over security of energy supply and potentially serious price rises for consumers, among other issues with the strategy as it stands. The establishment of an independent Energy Transition Taskforce is called for, as well as clarity over the role of energy regulator OFGEM in protecting consumers from price increases.

Context

According to the Climate Change Committee (CCC), by 2030, net zero investment must reach £50bn per year across the economy to stay on course with targets. The I&R Committee argues this investment must come in the form of new energy generation, usage and in the optimisation of existing energy infrastructure. The committee states that it is so far unconvinced that the correct policy detail exists at present, and there’s a very large gap between targets and investments.

Committee Recommendations

• Calls for government to set out detailed policies and funding models
  • Considering:
    • Enough power for a 2-3-fold increase in demand
    • Hydrogen as a potential power source
    • Building of CCS facilities for natural gas power generation
    • Development of nuclear, specifically Small Modular Reactors (SMRs)
    • Back up power generation for lulls in wind, solar supply
• Calls for a 2035 target for decarbonising the power/energy system
  • Failure to deliver on this may forfeit leadership position in Global Energy Transition
• Calls for a timeline for how and when the country pays for the transition
  • Consider options that east billpayer burden, especially for those on lower incomes
  • Be aware that charges on bills won’t cover the costs
  • Encourages government to consider borrowing to cover costs
  • Consider impending cost rises of nuclear (RAB)
• Detail of assurances on the security of energy supply
  • Securing of private sector investment for each new energy type
  • Assure affordable supply of gas
• Calls for the establishment of an Energy Transition Taskforce
  • To be responsible for coordination, strategic planning, and delivery monitoring
  • To oversee the activities of the proposed Future System Operator (FSO): responsible for planning and design of a secure decarbonised energy system
  • Avoidance of political rationality in energy transition policy
• Advises against OFGEM involvement in the transition, aside from consumer protection
  • OFGEM “too cautious” when it comes to new business models in the retail energy market
  • Static codes and licenses could hamper innovation that aids consumers in the transition.
  • Call for OFGEM to stay committed to consumer protection.

In Summary

techUK supports the I&R Committee’s calls for greater clarity on the policy detail of the Net Zero Strategy. It is in the interests of industry that clarity is given sooner rather than later, and with appropriate private sector consultation. The proposed policies should not inhibit innovation or place undue burden on consumers.

If formulated correctly through engagement with the right stakeholders, the proposed Energy Transition Taskforce could be an effective body at mediating the interests which will dictate the momentum of the net zero transition. Most importantly, these recommendations make no room for climate scepticism and make clear the need for a robust and ring-fenced approach to an equitable energy transition.