Energy crisis derails power decarbonisation progress

The government’s delivery plan for decarbonising the energy system by 2035 was derailed by last year’s focus on resolving the energy bills crisis, putting the target at risk, Whitehall’s spending watchdog has revealed.

In a new report, entitled Decarbonising the power sector, the National Audit Office says the recently wound up BEIS department has not yet acted on a recommendation by the Climate Change Committee to publish an overarching delivery plan for achieving its power decarbonisation goal.

It says that the department set up an energy portfolio office in April 2021 to draw up this plan and co-ordinate work on different energy programmes including renewables, nuclear power and networks.

However while the department had planned internally to prepare a first draft of this delivery plan by October last year, work was scaled back on coordinating long-term power sector decarbonisation during 2022 as the priority shifted to responding to record-breaking energy bills.

The subsequently rebadged Department for Energy Security and Net Zero (DESNZ) has told the NAO that has it still has more work to do on the stalled delivery plan, according to the report.

The report says increasing industry concerns about the lack of a blueprint to pull together different aspects of power has been reinforced in ex-energy minister Chris Skidmore’s recently published review of net zero delivery, which identified lack of long-term certainty as a clear barrier to action by businesses and individuals on the issue.

“DESNZ has made less progress since 2021 with establishing its long-term delivery plan than it intended because it needed to shift focus to respond to short-term challenges on energy supply and the cost of consumer bills,” it says.

This lack of a delivery plan means DESNZ “cannot be confident” that its ambition to decarbonise power by 2035 is achievable, says the report, adding that many of the changes necessary to achieve decarbonisation rely on technologies are not yet available or not yet ready to scale up to the level needed.

Decarbonising the grid by 2035 requires deployment of new low carbon at or close to, the maximum level which is technically feasible in that time, but several significant challenges exist, such as securing investment and identifying locations.

Establishing an overall delivery plan would help DESNZ understand the resilience of its plans to setbacks and identify advance alternative pathways that it could take if required, the report recommends.

The absence of a delivery plan also increases the risks that consumers will have to pay more in order to decarbonise power while maintaining security of supply, such as the increased costs of constraining renewable generation because of inadequate grid infrastructure.

A clear delivery plan could also increase the confidence of investors to fund new infrastructure, with knock-on reductions in the costs of capital.

And the NAO recommends that DESNZ should be updating its model of future power generation more frequently than annually, as it currently does, so that it can adjust more rapidly to events, like the recent escalation in gas prices.

It adds: “The longer DESNZ goes without a critical path bringing together different aspects of power decarbonisation, the higher the risk that it does not achieve its ambitions, or it does so at greater than necessary cost to taxpayers and consumers.”

Gareth Davies, head of the NAO, added: “It is understandable that DESNZ and its predecessor BEIS has focused on dealing with the immediate energy crisis over the past 12 months. But one consequence of this is that it lacks a delivery plan for decarbonising power by 2035, which is the backbone of its broader net zero ambition.

“The longer DESNZ goes without a critical path that brings together different aspects of power decarbonisation, the higher the risk that it does not achieve its ambitions, or it does so at a greater than necessary cost to taxpayers and consumers.”

Dame Meg Hillier, chair of the House of Commons Public Committee, said: “DESNZ must get cracking by producing a delivery plan and turning planning into action. The country’s long-term energy security and low-carbon future is at risk if DESNZ continues to stall.”