A comprehensive plan is needed to deliver energy security and prevent a disorderly transition to net zero, according to a report by the Lords Economic Affairs Committee.
Today (21 July 2022) the cross-party Committee has published its report, ‘Investing in energy: price, security and the transition to net zero’, which sets out a number of recommendations to Government.
The report concludes that 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 wants the Government to:
- Design 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.
- Enable 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.
- Ensure the UK Infrastructure Bank focuses on financing innovative and potentially riskier projects with the aim of signalling to investors that these projects are viable.
- Set out whether it intends to move forward with a levy on electricity generators as soon as possible, to avoid damaging investor confidence further.
- Address, 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 examine 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.
Lord Bridges 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.”
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