Economics of the energy sector (2024)

Economics of the Energy Sector: IET comments to the Energy Security and Net Zero Committee Inquiry on 16 April 2024.

The IET has responded to an Call for Evidence (CfE) by the Energy Security Committee into energy economics. This CfE commits the Energy Security and Net Zero Committee to look at potential reform of the energy sector to encourage greater decarbonisation, affordability and maintaining a reliable supply. This is aligned with the government’s commitment to decarbonise electricity by 2035. The IET has responded to this CfE with answers to each question presented.

The IET agrees that decarbonising the grid affordability is vital to the decarbonisation targets in the energy sector, and to those sectors that rely on it, such as: transport and built environment. The targets that have been set are ambitious and will lead to a shift in demand.

The IET highlighted that:

• There must be a common vision regarding future arrangements is necessary for effective oversight and timely interventions.
• The market and planning functions must be a coherent system, meeting the immediate needs of the energy system, efficient scheduling and investment into the infrastructure for the future.
• Building the grid infrastructure the country needs is a significant challenge and poses constraints at local and national levels. Therefore, the market design needs to reflect the increasing role of clean, affordable energy.
• The resources shouldn’t just supply energy, but all vital services needed to safely operate the energy system.

Although we welcome this CfE, and the measures that have already been put in place, there is much more work needed to understand how the emerging complexity is best addressed in future to ensure the system develops efficiently and resiliently. Whilst addressing these system-centric issues, it will be important to reflect on how technology change and the operation of the system and markets may impact the end users, both domestic and commercial.