More balanced gas and electricity bills ‘essential’

More balanced gas and electricity prices are essential for the UK to fulfil its net zero targets, the Climate Change Committee’s (CCC) annual report concludes.

The annual update warns that the government currently displays a “lack of urgency” on tackling climate change and that policies are not being developed at the required pace for meeting future targets.

The CCC says its confidence about the UK meeting its Fourth Carbon Budget, which covers the period between now and 2027, has slightly increased over the last year. However, this is largely due to an approximately 5% post-pandemic fall in driving and continued growth in electric vehicle sales.

Despite this, confidence in the UK meeting longer term emissions reduction targets – including the government’s 2030 Glasgow climate change summit pledge – has decreased since last year.

The CCC warns that the government’s strategy for meeting these medium-term targets has an over-reliance on technological solutions yet to be deployed at scale.

It concludes that one way to improve the outlook would be to ensure that the recent rebalancing of electricity and gas prices is made permanent.

The CCC says the government’s decision to take environmental and social levy costs off bills, as part of last winter’s wider energy support package, means the ratio of electricity prices to gas prices has fallen over the last year.

It says it is now essential that this improvement in relative prices is made permanent as part of the rebalancing of electricity and gas prices which the government has committed to implement by March next year. This recommendation comes as it emerged over last weekend that the government is planning to transfer these levies back from the Treasury to bill-payers.

The CCC says the government must back up its strong commitments, such as to decarbonise the electricity system by 2035 and install 600,000 heat pumps per year by 2028, by moving as swiftly as possible to delivery.

The Committee urges the government to “affirmatively embrace” electrification, which represents a no- or low-regret option for heat decarbonisation in many buildings. The “efficiency and readiness” of electric heating means it should be “the default choice where it is feasible.”

It says the government should “publicly narrow” the potential role of hydrogen, the value of which “lies in helping to cope with peak energy demand on the coldest days and in decarbonising those buildings for which there are no other viable solutions.”

“It would aid clarity on buildings decarbonisation for the government to make such a statement,” the report states.

The CCC says the government’s current position that a decision on the role of hydrogen will not be made until 2026 is generating “systematic uncertainty” and hindering the growth of supply chains for low-carbon heating: “Waiting three more years to set a clear direction will lead to further lost progress in buildings, and hinder infrastructure development more widely.”

The government should instead assume that the use of hydrogen is “limited at most to a back-up role in hybrid heat pump systems and only in limited areas of the country.”

The committee says this would enable any hydrogen rollout to be “compressed into a shorter timeframe,” adding: “In turn, this would mean it could start later, allowing a greater role for non-fossil hydrogen – with less reliance on a transitional role for hydrogen based on fossil fuels with CCS – and a proper window for electrification to be attempted at scale.”

The CCC also calls for radical reform of planning policy, warning of a danger that the rapid deployment of infrastructure required by the transition to net zero is being stymied or delayed by restrictive rules.

Overall UK greenhouse gas emissions were 450 MtCO2e in 2022, an increase of 0.8% since 2021, but 9% below 2019’s pre-pandemic level.

Emissions from homes decreased in 2022 by 16%, the CCC has calculated, largely driven by a relatively mild winter. Less than half of this fall (6%), was due to households turning down the heating due to high gas prices, the report estimates.

The CCC estimates electricity supply emissions were around 3 MtCO 2e higher than they would have otherwise been in 2022 due to demand from other European countries.

However increased renewable generation meant that overall power emissions were stable.

The CCC also calls for a coherent public engagement strategy on climate action, which it says is long overdue and will help empower consumers make environmentally-friendly consumption choices.

Philip Dunne MP, chairman of the House of Commons environmental audit committee, described the CCC’s latest report as “concerning reading” that should “serve as a wake-up call to ministers”.

He said: “While the government has indicated the ‘what’ it intends to deliver, there remain gaps in the ‘how’ to achieve through policy levers, leaving stakeholders at a loss to judge whether the UK is properly on track to meet its net zero commitments. This risks not creating sufficient confidence for investors looking to support the net zero transition in the UK: the current demand signals to investors lack clarity and consistency.

“Snappy, soundbite intent of ‘installing 600,000 heat pumps annually’, or ‘planting 30,000 hectares of trees a year’ sound impressive, but the detail on delivery and progress remains lacking. The CCC has pointed out these initiatives, which the committee has also examined, are far from being on track to meet the net zero targets set for this decade let alone for the next decades on the path to net zero by 2050.”

Colm Britchfield, policy advisor at environmental thinktank E3G said the report has issued a “red alert” to the government on home heating.

“Continuing to entertain the scientifically and economically incoherent idea of using hydrogen at scale to heat our homes is now officially holding back progress to net zero. Grant Shapps has already admitted that hydrogen is unlikely to be a major source of domestic heating – the government now needs to take the CCC’s advice to ‘embrace electrification as the default solution for buildings’ and rule out hydrogen, to get investment going in the solutions that really work.”

A government spokesperson said the UK can be proud of its record as a world-leader on net zero and that it is cutting emissions faster than any other G7 country.

“With a new department dedicated to delivering net zero and energy security, we are driving economic growth, creating jobs, bringing down energy bills, and reducing our dependence on imported fossil fuels.”