Decarbonisation progress slowing, Ofgem report shows

Greenhouse gas emissions have fallen by 42% since 1990, more than any other large advanced economy, due largely to the decarbonisation of electricity generation. This has been driven by Government policies, such as the carbon price which penalises coal plants in particular, and the huge growth in wind and solar power. In fact, renewables generated a record 33% of our electricity last year.

Progress is slowing however, with last year seeing the smallest reduction in emissions since 2012 (2.5% this year, down from a 3% fall the previous year).

Transport continued to be the largest single source of carbon emissions, although emissions fell slightly last year (3%), partly down to an increase in the number of alternative fuel vehicles, which now account for 2% of the licenced cars on the road in GB.

In June, the Government passed legislation requiring the UK to reduce carbon emissions to net zero by 2050 following calls from the Committee on Climate Change (CCC). To meet this target, significant investment is required, particularly in renewables, as well as policies aiding the roll-out of new low carbon technologies and supporting innovation to decarbonise how we heat our homes and businesses.

A priority of Ofgem’s new corporate strategy is helping decarbonise the economy at the lowest cost to consumers. Ofgem will set out more details on this early next year.

Separately, competition in Great Britain’s retail energy market continued to develop in 2018-19. Medium suppliers benefited the most from record switching rates (just over 20% in June 2019, up from 19% the previous year), which swelled their market share by 7 percentage points in electricity and 5 percentage points in gas to over 20% of consumers overall.

In January Ofgem implemented a cap on the price of default tariffs to protect consumers from overpaying for their energy.

The majority of customers on these deals are with the six larger suppliers who charged at the upper limit of the cap. In contrast, medium and small suppliers priced at £43 and £78 below the cap (January – June 2019).

Energy prices have a direct impact on the welfare of consumers, leading to rationing and even self-disconnection of energy by customers who cannot afford to pay their bills. Ofgem is publishing its updated Consumer Vulnerability Strategy this Autumn.

Joe Perkins, chief economist at Ofgem, said: “Ofgem’s latest state of the market report shows the progress made so far to decarbonise the economy but much more needs to be done.

“We want the UK to remain a global leader in bringing down greenhouse gas emissions, and our major objective is to help the country rise to the challenge of cutting emissions to net zero by 2050 at the lowest possible price to consumers.

“As well as protecting consumers in the future, our duty is also to protect those today. We will continue to enable competition and innovation which benefits consumers, whilst protecting those who need it, as we help build an energy market which works for all consumers.”

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