Once again, a UK budget has seen some significant energy policy announcements that will stir up conversation and opinion across the country. It also shows how reining in energy prices is seen as key to restraining inflation.
The pre-budget announcement to maintain the Energy Price Guarantee (EPG) at £2,500 had already brought much-needed clarity to energy suppliers and no doubt relief for many households, who rely on the scheme to safeguard their finances from the volatile energy market. While the government’s decision will come at an estimated additional cost of £2.6bn1 for the three months to July, price cap predictions indicate that the EPG costs will be short-lived, as average bills are expected to drop well below £2,500 in the latter half of the year. It’s a small price to pay to protect already hard-hit households.
The additional announcement that charges for prepayment meters will be aligned with comparable direct debit charges from 1 April 2024 will further help, and we wait to see more detail on the implementation.
Many businesses, like households, are struggling with high energy bills, and today’s statement that Climate Change Agreements will be extended by two more years from 1 April 2025 and that swimming pools and community groups will be getting access to a relief pot will be welcome news to those eligible. However, many will be left disappointed that there were no adjustments to the less supportive Energy Bill Discount Scheme due to take effect from the start of next month. While households have general support for another three months, the expectation is clear that the vast majority of users will once again see their energy bills driven by the market from the summer.
With government support for energy bills coming to an end, the government is seeking to stimulate more UK based energy production as a sustainable solution to the energy crisis. Today’s Budget promised £20bn to support carbon capture, utilisation and storage (CCUS), the establishment of Great British Nuclear and a commitment to competition for small modular reactors. We also saw nuclear energy reclassified as environmentally sustainable, signalling a desire for it to be included in the green taxonomy; this along with a refresh of the Control for Low Carbon Levies mechanism on energy policy costs, does feel like a step in the right direction towards a more sustainable UK energy market.
These, and other new initiatives will add to an already congested policy agenda as a UK General Election looms over the horizon. The challenge will be in the implementation of these many ambitions.
- The government’s decision to maintain the EPG at £2,500 will come at an estimated additional cost of £2.6bn for the three months to July bringing the estimated full cost of the scheme to 29.4bn.