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  • Writer's pictureArun Gopinath

National Audit Office (NAO) report highlights the challenges ahead for the decarbonisation of power

UK’s independent public spending watchdog, The National Audit Office (NAO), has warned that although power sector emissions have reduced significantly over the past three decades, Department for Energy Security and Net Zero (DESNZ) cannot be complacent about the challenges involved in decarbonising further while continuing to ensure a secure supply that meets the predicted electricity demand increases. This will require substantial investment in new capacity, alongside system-wide modernisation, and needs a joined-up approach to ensure changes happen in sequence and with coherence.

In February 2023, the government established the Department for Energy Security & Net Zero (DESNZ), which has overall responsibility for ensuring the government achieves its power sector ambitions. Government has overseen a 73% reduction in this sector’s emissions since 1990, although in 2021 greenhouse gas emissions from electricity generation still represented 13% of total UK emissions.


The report states, Transitioning to a secure, affordable and decarbonised supply of power by 2035 requires a step-change in both private investment and the pace at which new generating capacity is built.


"In its 2021 Net Zero Strategy, Department for Energy Security and Net Zero (DESNZ) estimated that £280 billion to £400 billion of public and private investment in generating capacity and flexible assets will be required by 2037 to achieve power sector decarbonisation. These costs represent the construction costs for power generation only, and do not include the costs for all aspects of decarbonising the power sector, such as network construction or research and innovation on technologies."-National Audit Office report on Decarbonising the power sector
"In its 2021 Net Zero Strategy, Department for Energy Security and Net Zero (DESNZ) estimated that £280 billion to £400 billion of public and private investment in generating capacity and flexible assets will be required by 2037 to achieve power sector decarbonisation. These costs represent the construction costs for power generation only, and do not include the costs for all aspects of decarbonising the power sector, such as network construction or research and innovation on technologies."

At Vahanomy, we feel this in some ways reflects the challenges that the electric vehicle charging infrastructure is facing the electric vehicle charging infrastructure where by 2030, between £8-18bn of investment in the EV charging infrastructure will be required to bridge the capital for costs of land, lease, grid investment by DNOs, network reinforcement costs and other opportunity costs.


The report also states to achieve its ambition for 50 gigawatts (GW) of offshore wind by 2030, the Department for Energy Security & Net Zero needs to oversee the deployment of three times as much offshore wind capacity in eight years as in the last two decades.


The power system needs to modernise to accommodate different kinds of electricity generation.

Renewables have different characteristics from the fossil fuel power sources they are set to replace. Wind and solar can only generate power when the wind is blowing or the sun is shining so generation cannot be controlled, unlike gas-fired power stations that can be turned on or off quickly to meet changes in demand. Renewables also have a very different economic model from gas-fired power stations, because once built they have relatively low running costs. These lower costs are not currently reflected in the price consumers pay for electricity because current market arrangements for buying and selling electricity were largely developed when gas and coal were the dominant fuels.


Decarbonising power requires the government to increase its planning and coordination of the power system. Expanding generation while modernising the power system entails several separate but linked changes that rely on a range of public and private sector organisations. Industry stakeholders are increasingly concerned about the lack of a government delivery plan that brings different aspects of power together.


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