Getting it done? What the Budget means for energy and clean growth

New Chancellor Rishi Sunak has delivered his first Budget after less than a month in the job. On areas such as the living wage, growth and investment, Sunak said again and again that the government is “getting it done!” However, there was relatively little news in the speech on what the government was getting done in terms of energy and clean growth. The Budget 2020 document contained more detail of actions to be taken by the Treasury.

Pollution taxation

The government is raising the Climate Change Levy (CCL) on gas in 2022-23 and 2023-24 (whilst freezing the rate on electricity) and opening it to new entrants. Alongside this, the government will consult on introducing a Green Gas Levy-funded support for biomethane production to increase the proportion of green gas on the grid.

The Climate Change Agreement scheme will be reopened and extended by two years. Additionally, Carbon Price Support is to be frozen for 2021-22.

Heat

There were several heat announcements in the document. The Budget confirmed £96mn for the final year of the Heat Networks Investment Project, which ends in March 2022. After this, the government will invest a further £270mn in a new Green Heat Networks Scheme, enabling new and existing heat networks to be low carbon and connect to waste heat.

The government will extend the Domestic RHI in Great Britain until 31 March 2022. It will also introduce a new allocation of flexible tariff guarantees to the Non-Domestic RHI in Great Britain in March 2021, helping to provide investment certainty for the larger and more cost-effective renewable heat projects.

The government will consult on introducing a new grant scheme from April 2022 to help households and small businesses invest in heat pumps and biomass boilers, backed by £100mn of Exchequer funding.

Transport

With road transport representing 91% of all transport emissions, the government stressed the importance of decarbonising this sector in the Budget. It said access to charging infrastructure is essential to enable drivers to make the switch the electric vehicles (EVs), so £500mn was announced for EV rapid charging hubs to ensure “drivers are never more than 30 miles away from one”.

This will include a Rapid Charging Fund to help businesses with the cost of connecting fast charge points to the electricity grid. To target spending from this fund effectively, the Office for Low Emission Vehicles will complete a comprehensive electric vehicle charging infrastructure review.

The government is considering the long-term future of incentives for zero emission vehicles alongside the 2040 phase-out date consultation. Until then, it will provide £403mn for the Plug-in Car Grant, extending it to 2022-23. The government will also provide £129.5mn to extend the Plug-in Grants for vans, taxis and motorcycles to 2022‑23.

In addition, the Budget announced the exemption of zero emission cars from the Vehicle Excise Duty (VED) ‘expensive car supplement’ and the publication of a call for evidence on VED, which will include how it can be further used to reduce vehicle emissions. The Capital Allowances for Business Cars first year allowance on zero emission cars will be extended and eligibility criteria raised.

Additionally, the government announced it is spending over £27bn between 2020 and 2025 on England’s strategic roads.

Power

The Budget contained little in the way of power decarbonisation announcements. However, it did say it would be spending £800mn to establish two or more carbon capture and storage clusters, one by the mid-2020s, a second by 2030. Using consumer subsidies, the government will also support the construction of the UK’s first CCS power plant. Additionally, part of £900mn of funding will go towards ensuring UK businesses are leading the way in high-potential technologies, including commercialising nuclear fusion technology.

Other

The government will at least double the size of the Energy Innovation Programme, with exact budgets to be decided at the Comprehensive Spending Review.

The Budget also announced further support for exporters by extending and increasing the lending capacity of UK Export Finance (UKEF). This will make permanent the additional £2 billion provided to UKEF at Budget 2018 as well as provide a new £2 billion lending facility for projects supporting clean growth. UKEF will also expand its face-to-face support for exporters focused on clean growth in the North of England and Scotland.

This Budget appears to signal that the government is recognising that action needs to be taken in heat and transport, with some significant announcements for each sector. The decision to freeze the CCL on electricity while raising it for gas shows the government recognising the scale of gas’ carbon footprint. Specific power announcements were thin on the ground, but we hope the delayed National Infrastructure Strategy will fill some of the gaps.

On the same day as the Budget, BEIS launched a consultation on the Reforming Regulation Initiative, asking for input on “how we could improve the system of UK regulation”.

You may also be interested in…

Service | Energy retail and electric vehicle

Training | Introducing the low-carbon heat landscape

Product | Energy market bulletin

Related thinking

E-mobility and low carbon

Another one bites the dust: Plug-in car grant ends

Last week the government announced the plug-in car grant scheme for electric vehicles (EVs) closed, having previously confirmed funding until 2022-23. Why? Well, the government stated it would allow it to concentrate funding towards what it called the main barriers to the EV transition, including public charging and supporting the...

Commercial and market outlook

Ofgem outlines thinking on protecting credit balances and RO payments

This article is an extract from our Energy Spectrum publication issued on Monday 25 April. If you are interested in receiving critical policy, regulatory, market and transactional developments across the energy sector, and would like a free full sample of Energy Spectrum, please request a copy here. You only need...

Low carbon generation

Why is RAB being pursued for new nuclear

Nuclear generation has experienced a stop-start approach to investment in GB since the then Labour government put it back on the policy agenda in the early 2000s. Even with the addressing of environmental and operational concerns to the satisfaction of policymakers and regulators, its high capital costs made it require...

Commercial and market outlook

EU Commission publishes climate change mitigation taxonomy

An excerpt from our European Weekly Bulletin, part of our Energy Spectrum Europe package. On Wednesday 2 February, the EU Commission presented its Taxonomy Complementary Climate Delegated Act on climate change mitigation and adaptation covering certain gas and nuclear activities. The commission states that it aims to prevent greenwashing and...

Regulation and policy

New obligations for gas suppliers under the GGL

The Green Gas Support Scheme (GGSS) was launched on 30 November 2021, which aims to financially support producers of biomethane through anaerobic digestion. The scheme will be funded through the Green Gas levy (GGL), by placing an obligation on all fossil fuel gas suppliers, with the exception of those that...

Commercial and market outlook

2021’s most exciting ‘Charts of the week’

Some of our team have looked back throughout 2021 and picked their most exciting 'Chart of the week'. Read about their choices and click through to read the full 'Chart of the week'. To do so, you need a free Cornwall Insight account which is easy to create here. Green...

Announcement

Our GB 2021 Consultancy highlights

We are independent advisors operating across the energy value chain. Our team of passionate energy experts has supported over 120 customers in 2021. This includes generators, developers, investors, network companies and public bodies.Here is a small selection of our work in 2021: Cornwall Insight’s consultancy team provides high-quality insight across...

Heat networks

Heat network approaches being developed by devolved administrations and UK government

A number of further consultations on the policy approaches for heat networks have been issued in recent weeks:  The Scottish government published its draft Heat Networks Delivery Plan on 15 November, outlining how it will quintuple heat demand provided from heat networks in Scotland by 2030; and The UK government issued...