Committee calls for Energy Transformation Taskforce

A new body, modelled on the taskforce that led the roll out of the UK’s vaccine programme and reporting directly to the prime minister, should be set up “immediately” to spearhead the transition to net zero emissions, a House of Lords committee has urged.

The Industry and Regulators Committee, which has published its report on its long-running inquiry into the UK’s energy transformation, said the new body should be set up to co-ordinate efforts to curb emissions rather than hand the task to Ofgem.

In one of its key recommendations, the committee of peers called for the establishment of an Energy Transformation Taskforce to provide what it says is the “necessary political and policy leadership across Whitehall” to put net zero at the “heart of government”.

Reporting directly to a Cabinet sub-committee chaired by the PM, the taskforce would be responsible for economy-wide strategic planning and cross-departmental co-ordination of efforts to reach net zero emissions as well as monitoring the implementation of resulting measures across “all departments and agencies”.

The taskforce, which would be composed of experts like its vaccine equivalent but set up on a longer-term footing, could provide the “agility” necessary to navigate the “inherent uncertainty” surrounding transition, the committee said.

The body could not be independent of government because it will need to address “politically sensitive” policy issues, including public spending commitments, and would be housed in the Cabinet Office.

The report recommended that the Cabinet committee should authorise any government financing and agree key policies, which the task force would then translate into detailed policy across Whitehall’s departments. The task force should be set up “immediately” because of the “urgent need” for action on net zero within the next few years.

The committee also concluded that Ofgem should not have a “co-ordinating or political” role in the net zero transition and should maintain its existing responsibilities for economic regulation and consumer protection.

However, given the “significant role” that the energy regulator will play, it is important to review its responsibilities to ensure it is “not a barrier to a net zero energy system”.

The committee added its voice to the chorus of calls for Ofgem to be given an “explicit” net zero duty but cautioned that this step alone would not offer a sufficient steer for the regulator to manage the political and distributional trade-offs involved in meeting its varied objectives.

The report recommended that the government must give greater guidance to the regulator on how to juggle these trade-offs when it issues its planned but long-delayed Strategy and Policy Statement to Ofgem.

“These trade-offs are political in nature and the government needs to clearly set out how Ofgem should approach these issues,” the report said.

However, the committee criticised the regulatory system as “too slow and difficult to change”.

Ofgem is “often too cautious” in its approach to allowing new business models into the retail energy market and must be “more open to innovative new companies and to enabling investment,” the report said: “The governance of the energy system is the product of a previously more settled era and needs to become more responsive to the dynamic transformation required to implement the transition to net zero.”

Overall, the committee said it is “not persuaded” that the necessary level of policy detail is in place to achieve the UK’s emissions reductions commitments and that there is a “very large gap” between the government’s “ambitious” targets and the extensive investment required from businesses and individuals.

It said the sums generated through levies on bills – the main plank of the government’s existing decarbonisation financing regime – supply “only a fraction of the required amount”, fall “disproportionately” on lower-income bill-payers and involve “invidious trade-offs” by making consumers pay for investments that may not directly benefit them.

The Committee concluded that the use of government borrowing is fairer from an intergenerational perspective because future taxpayers will benefit more from the move to a carbon-free energy system than current billpayers.

Given these concerns, the committee called on the government to reconsider its opposition to the use of government borrowing to finance low-carbon energy infrastructure and to publish its promised affordability and fairness review “as soon as possible” and consultation on “more detailed proposals” by the end of this year.

Other recommendations include that the government should set out clearly the future role for nuclear and gas as “important” backups to more weather-dependent intermittent energy sources in order to ensure security of energy supply.

The committee’s chair, Lord Hollick, 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.

“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.”

Utility Week spoke to Lord Hollick in detail about the report’s recommendations. You can read the interview here.