No delivery plan for power decarbonisation, says NAO

The UK government risks not meeting its ambition to decarbonise power by 2035 because it lacks a delivery plan, the National Audit Office (NAO) warned today. 

The UK’s independent public spending watchdog says that, with attention focused on the recent energy crisis, the Department for Energy Security and Net Zero (DESNZ) has made little progress with a long-term delivery plan for all electricity to be generated through clean energy sources.

With the government’s own net zero strategy predicting a 60% increase in electricity demand − due to modes of transport and heating in buildings switching to electricity from fossil fuels − decarbonising electricity has become the backbone of the government’s 2019 plan to achieve net zero greenhouse gas emissions by 2050. 

Switching to clean electricity generation has also increasingly become part of the government’s plan to ensure there is an affordable and secure domestic energy supply in response to the disruption to international gas supplies that has followed Russia’s invasion of Ukraine. 

Government has set an ambition that, by 2035, all electricity should be generated using clean sources, subject to maintaining security of supply, phasing out gas-fired power stations in favour of wind, solar and nuclear power.

DESNZ was recently created as a new department taking on the responsibilities for energy security and net zero that were previously held by the Department for Business, Energy and Industrial Strategy. 

As BEIS, it had internally planned, by October 2022, to have established a clear pathway to decarbonisation by 2035. However, because it was focusing attention on responses to record-high energy bills, the department scaled back its work on coordinating long-term power sector decarbonisation. DESNZ still has more work to do to develop a delivery plan.

The NAO says the lack of a delivery plan risks diminishing the confidence of industry stakeholders, who have increasingly expressed concerns about how all the change and investment that is needed across the power sector will be brought together without a strategic vision. 

Similarly, the absence of a clear plan and the perception that there could be changes in government policies could deter external investors from providing funds for new infrastructure or lead them to increase the rates of return they require, ultimately increasing costs for energy consumers.

While emissions from UK power generation have decreased by 73% since 1990, 41% of UK electricity is still produced from natural gas (which will need to be phased out or adapted with carbon capture to achieve decarbonisation) and greenhouse gas emissions from electricity generation made up 13% of total UK emissions in 2021.

The NAO report sets out the challenges of achieving the remaining emission reductions, highlighting that the government’s ambitions for the expansion of offshore wind, solar and nuclear power will require much faster deployment rates than have been achieved before. 

For the government to meet its goal of achieving 50 gigawatts (GW) of offshore wind by 2030, DESNZ will need to oversee the deployment of nearly three times as much offshore wind capacity in eight years as it has in the last two decades.

Transitioning to a secure, affordable and decarbonised supply of power by 2035 will require a step-change in both private investment and the pace at which new generating capacity is built. In its Net Zero Strategy, the government estimated that £280bn to £400bn of investment would be needed to generate the required new capacity, however this only accounts for construction costs relating to power generation – it does not include costs for all aspects of decarbonising electricity production, such as network construction or research and innovation on technologies. 

Total costs will depend on multiple factors, including the location of new generation and the impact of any reforms to the electricity market.

The NAO recommends that DESNZ needs to set clear measures of overall progress with interim milestones and that these should be reported annually to Parliament, along with an explanation of how this performance information has been used to determine any significant changes to its overall plan.

Gareth Davies, head of the NAO, said: “It is understandable that DESNZ and its predecessor BEIS has focused on dealing with the immediate energy crisis over the past 12 months. But one consequence of this is that it lacks a delivery plan for decarbonising power by 2035, which is the backbone of its broader net zero ambition.

“The longer DESNZ goes without a critical path that brings together different aspects of power decarbonisation, the higher the risk that it does not achieve its ambitions, or it does so at a greater than necessary cost to taxpayers and consumers.”

Initial industry responses also emphasised the urgency around having a clear delivery plan in place. 

Stephen Marcos Jones, chief executive of the Association for Consultancy and Engineering (ACE), said: “ACE members are critical to the successful delivery of complex infrastructure projects. They stand ready to work in close partnership with government in the creation and design of a more secure, and less carbon intensive, domestic energy system.

“To deliver net zero, the government will need to deliver on a range of energy solutions in order to deliver the cheapest forms of renewable energy. It will take time for any plan to deliver results. Nevertheless, as the NAO rightly states in their report, we need to urgently accelerate new forms of energy, be that nuclear, offshore win, hydrogen, or solar."

Christophe Junillon, Atkins managing director, nuclear & power, said: “Today’s important National Audit Office report reinforces the urgent need to move beyond high level long term targets and shift from ambition to action by creating a full delivery plan for the UK’s energy transition with near term performance metrics.

“Decarbonising our energy system is the biggest infrastructure programme the UK has ever seen, and the scale of the engineering challenge to deliver it by 2035 can’t be under-estimated: we need to build new generation at five times the current rate, double the size of our energy system and install six times the amount of network infrastructure, all in parallel.

“A major infrastructure programme needs a detailed delivery plan behind it: as the NAO asserts, we need to urgently accelerate new nuclear; streamline the development of offshore wind and the network and storage infrastructure to support it; and put in place a delivery plan to coordinate a whole system approach to decarbonising power in the most cost-effective and efficient way. 

“It is also fundamentally important that this plan is created by a body that can oversee its implementation and adapt it where necessary. This plan, along with tangible targets and measurement to ensure progress remains on track, is vital to ensure the UK achieves net zero ambitions and long overdue.”

Click here to download the full NAO report: Decarbonising the Power Sector.