Today the cross-party Lords Economic Affairs Committee published
its report, ‘Investing in energy: price, security and the
transition to net zero’.
The report concludes that to help avoid a disorderly transition
to net zero, the Government should publish a net zero delivery
plan which takes account of energy security, and makes clear what
decisions are needed by when. This would help provide additional
confidence to the public, business, and investors.
The committee identified a number of issues where action is
needed now if the Government is to meet its objective to be net
zero by 2050. The committee recommended the Government:
- designs market models for low carbon technologies – such as
long-duration storage, blue and green hydrogen, and carbon
capture and storage - so as to make energy pricing more
predictable.
- include energy security objectives in the National Planning
Policy Framework alongside the climate change objectives.
- enables more investment in the North Sea, while ensuring any
extension of oil and gas exploration or investment should focus
on projects with short lead times and payback periods, to limit
the risk of stranded assets.
- ensures the UK Infrastructure Bank focuses on financing
innovative and potentially riskier projects with the aim of
signalling to investors that these projects are viable.
- sets out whether it intends to move forward with a levy on
electricity generators as soon as possible, to avoid damaging
investor confidence further.
- addresses, in its forthcoming critical minerals strategy, the
steps the UK needs to take to avoid becoming reliant on strategic
competitors, notably China, for critical minerals needed for
low-carbon technology; and examines supply chain vulnerabilities
and policies to mitigate them.
As well as this, several steps could be taken now which could
make a significant difference to energy security and
affordability over the next three to five years. The Government
should:
- harness public concern about high energy bills to speed up
the pace of home insulation and other measures to improve energy
efficiency.
- re-examine its ambitions for onshore wind, while being
mindful of there being some local opposition to it; and explore
how local communities could benefit from the energy that is
produced in their areas.
- urgently seek an agreement with its European partners on
energy co-operation, as there is no agreement in place to manage
energy supply emergencies.
- continue to seek to maintain existing energy generation in
the short term, including coal power stations where necessary, to
reduce dependency on expensive gas imports.
The financial sector and its regulators are playing a critical
role in supporting the transition. To ensure that their efforts
are aligned with overall Government policy, the committee
recommends that:
- Regulators set out how high-level principles on how they are
interpreting the Chancellor’s instruction on energy security as
soon as possible.
- Any green taxonomy avoids giving the impression that projects
are either green or brown, which may stifle innovation and fail
to reflect the process of transition.
- Businesses are supported to make their climate-related
financial disclosures consistent and help them gather
quantitative data on their climate impact.
of Headley, Chair of the House
of Lords Economic Affairs Committee, said:
“The impact of Russia’s invasion of Ukraine on energy prices has
been a wake-up call on how vulnerable our energy security is.
“The Government has set ambitious targets for low-carbon power
generation, but there is a gap between those ambitions and
practical plans for delivery. If we don’t plug that gap, and fail
to ensure that our energy is reliable, affordable and renewable,
our transition to net zero will be disorderly – and we will all
pay the price.
“So action is needed to build investor confidence, mobilise more
capital and accelerate the deployment of renewables in the
decades to come. The message to the Government is clear: act now
to avoid falling into the gap.”
