The Government is likely to miss its targets for reducing
emissions to net zero by 2050 because of a failure to put in
place credible plans which are needed to encourage essential
investment by consumers and businesses.
In a report published today, the House of Lords Industry and
Regulators Committee concludes that there is insufficient policy
detail to incentivise the £50 billion a year of investment that
will be required every year to transform our energy system. The
Committee says that the targets have not been matched by the
policies and the clarity over financial incentives necessary to
unlock the substantial private investment needed to fund new
energy technologies for both industrial and domestic use.
Providing greater clarity requires political decisions over the
range of options available and their consequences for consumers,
taxpayers and security of supply, decisions which cut across
government and cannot be left to independent regulators.
The Committee calls for the urgent establishment of a
Transformation Taskforce within government, reporting to the
Prime Minister and housed within the Cabinet Office.
This taskforce would work across Government departments,
including the Treasury, to set out a clear roadmap for the
development and implementation of energy policies, and act as a
coordinator and monitor of progress.
The report also demands that the Government act urgently to
explain how the transition to net zero will be funded. It calls
on the Government to consider the full range of funding options
for energy investment, including reviewing its opposition to the
use of government borrowing. Expecting the costs of net
zero to be met exclusively by energy users through their bills is
regressive and would place a severe burden on
many consumers, particularly given the present surge in energy
prices which is putting intense pressure on
those least able to pay.
Other recommendations in the report include:
- The Committee concludes that the use of government
borrowing is fairer from an intergenerational
perspective than requiring all costs to be met by
upfront charges, as future taxpayers benefit more from the move
to a carbon-free energy system than current billpayers.
-
Ensuring security of energy supply alongside responding
to climate change must remain a key priority for the
Government. It should now set out clearly the future
role for nuclear and gas as backups to more weather-dependent
intermittent energy sources. The will include facilitating
greater exploitation of our own national gas resources.
-
The responsibilities and role of Ofgem should be
reviewed to ensure it is not creating barriers to a net zero
energy system. Ofgem should also move away from a
focus on switching, as well as introducing a more robust
supervisory framework to ensure companies entering the market
are viable with new capital requirement and a ‘fit and proper
person test’. This will help avoid a repetition of the collapse
of multiple energy suppliers as we have seen in recent months.
Commenting , Chair of the Committee,
said:
“The Government has set ambitious targets for net zero including
a carbon-free power system by 2035; however there is no point
planning a carbon-free energy future if you haven’t got a clue
how you will get there or how it will be paid for.
“We now need urgent action from the Government to answer
outstanding questions on issues such as how they will incentivise
households to replace gas boilers with heat pumps - and what
plans there are for the 6 million homes where heat pumps may be
unsuitable - what funding mechanisms will be established to
encourage investment in small modular nuclear reactors and how
the upgrade of our infrastructure to allow the use of hydrogen
for heating will be funded. These are basic questions that need
to be answered before we will get the investment we need to get
to net zero.
“The amounts that can realistically be raised via surcharges on
energy bills is not enough. Bills are regressive as the poor pay
more of their income on energy costs; it is also unfair to the
current generation as we are asking current billpayers to cover
the huge costs of something that is designed to mainly benefit
future generations. The Government should look again at using
greater public borrowing to fund what are huge and long-term
infrastructure costs. That would give investors confidence to
invest in new technologies and ensure the public aren’t hit
immediately with higher bills at a time that many are already
struggling with fuel poverty.
“While money is a key challenge it isn’t the only one. We need
better co-ordination across Government and a real drive and focus
to deliver net zero. This requires tackling highly sensitive,
political decisions that affect all consumers and taxpayers..
That is why we are calling for a new Energy Transformation
Taskforce within government that will report directly to
the Prime Minster and take the lead in setting and co-ordinating
net zero strategy and policy across government.”
