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

Home supply and services

Introducing the Green Gas Levy

In Autumn 2021 the Green Gas Support Scheme (GGSS) will be launched, supporting decarbonisation of the gas grid as the UK aims to reach net zero emissions by 2050. The GGSS will predominately focus on providing financial incentives for biomethane (green gas) injection in the grid and, in order to...

Commercial and market outlook

How can research help: what is the gap in understanding that should be addressed most urgently?

In the last two decades, the debate around addressing climate change has rightly focused on identifying – and supporting – the most suitable technologies to decarbonise our economies. Consequently, significant progress has been achieved in the decarbonisation of the power sector. However, as the priority is now to decarbonise hard-to-abate...

Announcement

Energy market and net zero transition learning and development: Role-relevant career development training

We’re well over halfway through the calendar year and are now beginning to see more of the government’s thinking and policy-shaping around what needs to change to meet the 2050 net zero target. For example, the flurry of documents issued towards the end of 2020, including the Energy White Paper...

Energy storage and flexibility

How nuclear energy can help the UK reach its net zero goals

This article was originally written in Energy Spectrum on 21 March 2021. To find out more about a subscription to Energy Spectrum, please contact Nick on n.palmer@cornwall-insight.com. There are several challenges to reaching net zero, where its proponents believe nuclear could add value. Some of tomorrow’s main issues concern: How to provide low...

Commercial and market outlook

Heat pumps and peak power demand in North-West Europe in 2030

In March Cornwall Insight launched its new Energy Spectrum Europe publication in collaboration with the Institute of Energy Economics at the University of Cologne (EWI). Below is an extract of our Energy Perspective article from our latest issue, written by Nils Namockel from EWI.  Heat pumps powered by green electricity...

Low carbon generation

Up north and down south – trends for generator TNUoS charging

The topic of generator Transmission Network Use of System (TNUoS) is becoming a subject of increasing interest for stakeholders as regulation, policy, and the generation mix create potential volatility for future charging trends. The significant costs posed through TNUoS are an important consideration for generators, with high variability between regions...

Announcement

Alert: Budget 2021

Chancellor Rishi Sunak delivered his Budget on 3 March, a year on from the start of the COVID-19 crisis and his second in the job. Headline announcements included, among others, a sovereign green bond, the UK Infrastructure Bank, a freeze in Carbon Price Support and £20mn for floating offshore wind....

Net zero corporates and ESG

Sleeving Pools could enable local authorities to procure local energy

This blog post is adapted from an article in March’s issue of Energy net zero, published on 31 March. To find out more about a subscription to Energy net zero, please contact Veronica at v.truman@cornwall-insight.com. For many local authorities and corporates, development of small-scale renewables and consideration of generation production...