House of Lords Industry and Regulations Committee publishes Net Zero Transition Report
The new wide-ranging report provides evidence from industry experts on the energy transition in delivering net zero.
The report identifies regulatory barriers to innovation, lack of sufficient policies and governance structures, as well as concerns over security of energy supply and potentially serious price rises for consumers, among other issues with the strategy as it stands.
The establishment of an Energy Transition Taskforce is called for to ensure a collaborative approach amongst departments. 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.
Ofgem’s role was called into question with regards to the extent of their remit.
Decentralisation of the energy system was highlighted “to be a really important part of how we meet net zero”. This is not a straightforward system anymore, and the technology and business models must reflect that.
Current retail business models were called out and must change to enable flexibility and help consumers with decarbonising their energy use. Even a larger reform may be needed to provide customers to access to a greater, lower cost renewable energy capacity.
Article continues below:
Committee Recommendations
Calls for government to set out detailed policies.
Calls for a 2035 target for decarbonising the power/energy system.
- Failure to deliver on this may forfeit leadership position in Global Energy Transition.
Calls for a funding model for the energy transition.
- Through billpayers is regressive and involves invidious trade-offs, making some consumers pay for investments that will not directly benefit them.
- Consider options that east billpayer burden, especially for those on lower incomes.
- Urge the Government to consider the full range of funding options including the UK Infrastructure Bank, the British Business Bank, carbon pricing, co- investment, investment subsidies, investment tax relief and Contracts for Difference.
- Encourages government to reconsider borrowing to cover costs.
- Support the Government’s plans to publish this year a call for evidence on fairness and affordability.
Detail of assurances on the security of energy supply.
- Securing of private sector investment for each new energy type.
- Questions raise over the role of gas and its price volatility.
Call for the establishment of an Energy Transition Taskforce.
- To be responsible for coordination, strategic planning, and delivery monitoring.
Government to move promptly in establishing the Future System Operator.
- Calling for clear objectives and responsibilities to avoid increasing complexity in the governance of the energy sector.
- Should not have a wider role in coordinating the net zero transition.
Ofgem’s remit and assessment.
- Duties should be amended to include explicit reference to having due regard to the net zero target
- Ofgem’s primary focus should remain on its supplier regulation, economic regulation and consumer protection responsibilities
- Ofgem “too cautious” when it comes to new business models in the retail energy market.
- Static codes and licenses could hamper innovation that aids consumers in the transition.
Competition.
- Government and Ofgem should set out their expectation that companies should compete on their overall service and value to customers and not just on price. The use of switching as a singular metric of competition should be abandoned.
We welcome the House of Lords Industry and Regulations Committee enquiry, call for clarity and its recommendations. We agree with the Committee’s calls for greater clarity on the policy detail of the Net Zero Strategy. It is in the interests of industry that clarity is given sooner rather than later, and with appropriate private sector consultation, without restricting and overregulating. We also support the views of this roadmap needing to be “dynamic, recognising that technology developments over time may result in differing incentives and priorities becoming appropriate”. We have supported new market entries capabilities to innovate but we do agree that the current regime does not make it easy, because the ability for regulation to adapt with technology innovation in the timeframe that is required is not currently there. Innovation must be accelerated with the appropriate mechanisms and consumer protection in place. We would like to see a transparent initiation of a cross departmental taskforce. Our view is that this must be carried out with a careful stakeholder engagement from various sector groups and not just energy. The energy transition touches upon multiple areas such as digital technology, environmental policy, supply chain and retail, finance, infrastructure and transport, and a greater collaboration between regulators (e.g., Ofgem, Ofwat, and Ofcom). Digital technologies have an even greater role to play in providing the right low-cost solutions for the energy transition. We would like to stress out the importance of the digitalisation journey and expertise needed in government.
Teodora Kaneva
Teodora’s rich background varies from working in business development for a renewable energy lobbying association in Brussels to the fast moving technology innovation startup scene in the UK.
techUK - Committed to Climate Action
techUK is working to remove barriers to tech investment for all sectors. We are advocating for a policy and regulatory environment that removes the barriers to tech investment. techUK will lobby for a tax, R&D, innovation, and business environment that enables all sectors to invest in digital tools to help them decarbonise and, in turn, supports the growth of clean tech. For more information on our objectives, please visit our Climate Action Hub and click ‘Contact us’.
