Over time, the state has steered the energy market towards decarbonisation, through policies such as carbon pricing and those supporting investment in renewables. As a result, carbon emissions have fallen by 53% across the UK. However, meeting and maintaining net zero emissions across the whole economy will start to become more challenging, involving decarbonising transport, heat and ‘hard to abate’ sectors like large industry and aviation. This means the UK faces the challenge of achieving and maintaining zero-carbon power while addressing a likely increase in energy demand.

Many pieces of the puzzle needed to deliver decarbonisation are in place, and the industry has the necessary ambition to deliver this. There are three overarching problems that need to be tackled, however; greater coordination and certainty is needed; the pace of change needs to be quicker, and good value for money is essential. This is where the state has a role to play.

This report by Nesta and Baringa Management Consulting, funded by the European Climate Foundation, sets out an expanded role for the state that could help to address these problems, accelerating the pace of decarbonisation, bringing down the costs of the transition, improving the resilience of the energy system and promoting economic growth.

Through several meetings with senior industry stakeholders, including the new Government, our thinking has helped to inform Government policy regarding the role of the state and the formation of GB Energy.

The authors set out four roles that the state needs to play:

1. The state as a planner: introduction of a system architect that would develop an overarching strategic plan to guide technology choices and locational deployment of assets, co-optimising these choices with network development
2. The state as a developer: undertaking a range of roles such as pre-development for large-scale assets identified in the above plan
3. The state as an investor: carrying out a range of investment activities including investing directly into higher risk emerging technologies
4. The state as an enabler: with actions ranging from planning system reforms that would help unlock potential projects to a new public energy procurer that would coordinate energy procurement for public bodies

If implemented carefully, the proposals set out in this report protect short-term decarbonisation while providing a strong foundation to meet the challenge of delivering economy-wide net zero emissions in the longer term.