The energy sector has criticised the lack of focus within the Spring Budget on the development of renewables, energy efficiency and infrastructure, despite some technology support.
“Today’s Budget does not create the framework needed to mobilise investment and turn the UK into a clean energy superpower. It will not enable the renewable energy industry to build vital new projects much faster or grow supply chains. We need much bolder action to scale up far more rapidly, to boost Britain’s energy security and provide cheap power to consumers,” said RenewableUK’s executive director of Policy and Engagement Ana Musat.
“Although we welcome the increase in capital allowance rates, this only lasts for three years and will do little to encourage long-term investment in the UK economy and attract the capital required to build key infrastructure such as ports and our transmission grid. A review of the capital allowance regime as a whole and clarity about its long-term stability are needed to ensure the UK remains an internationally competitive investment destination.”
EPG extension welcomed
The industry did welcome the extension of the Energy Price Guarantee at its current level for another three months, capping bills at £2,500 rather than rising by £500.
Greg Jackson, founder of Octopus Energy, said: “The extension of the energy bill support is a huge relief for millions of customers. Wholesale costs are falling, but they are still significantly higher than normal levels. This help is vital not only for households, but also for helping the economy and tackling inflation.”
But there remains a lack of clarity for wider support of energy users, as while wholesale energy costs have fallen by 50% in comparison to last year, they remain high.
“While it is clearly welcome that there will be a three month extension to the Energy Price Guarantee for households, a similar provision was not announced for businesses. The Energy Bill Relief Scheme will be replaced by the Energy Bills Discount Scheme (EBDS) in April, which will result in much lower levels of government support for the majority of businesses,” said Anthony Ainsworth, chief operating officer at npower Business Solutions.
“That said, with the announcement of £63m of new funding to help swimming pools and leisure centres to reduce energy costs and drive investment in energy efficiency upgrades, the Chancellor has acknowledged that targeted support for specific sectors is needed.
“When the EBDS was announced, the Treasury said it would outline further guidance on a higher level of support for energy intensive industries (EIIs). This has yet to be published and needs to happen sooner rather than later.”
Action on pre-payment meters was welcomed, as as area that has attracted particular attention over this winter whilst many struggled with energy bills.
Professor Karen Turner, director of the University of Strathclyde’s Centre for Energy Policy, said: “Perhaps the most important – and socially progressive – measure announced was ending the charging of higher electricity and gas rates to those on prepayment meters. This brings the rates payable by what are generally lower income and more vulnerable households in line with what most pay via direct debit.”
Green heating: Heat pumps missing
There was also support for the introduction of heat networks, although support for electrified solutions like heat pumps was notably absent.
“We are very pleased at having helped to secure today’s £380 million heat network support package. While heat networks only supply 2% of the country’s heating demand today, they are an internationally proven route for decarbonising heat at scale and will need to see significant growth if we are to successfully decarbonise our towns and cities. This growth will need to be underpinned by a wealth of supportive regulations, and today’s announcement makes a real step in the right direction,” said Kieran Sinclair, heat policy manager at the Association for Decentralised Energy (ADE).
But others criticised the lack of support for other green heating technology, in particular as the Government’s 600,000 annual heat pump installation target is seeming increasingly challenging to meet.
“Yet again this budget has ignored the clear case for shifting the Climate Change Levy’s focus away from electricity to gas, leaving low-carbon heating out in the cold. A heat pump will typically save 5-10% in annual running costs compared to a gas boiler, but the prospect of further savings is being strangled by what’s basically an outdated tax on the electricity that powers them,” said Henk Van den Berg from heat pump manufacturer Daikin UK.
“If heat pumps are to become mainstream and support the UK’s net zero ambition, more needs to be done to prevent us from falling behind other countries in the global green race. While financial support from the government is still in place, the benefits of heat pumps versus fossil fuel systems need to be properly communicated to encourage better uptake of the Boiler Upgrade Scheme, bringing forward a ban on installing gas boilers in new homes, and clearer training support for installers.”
CCUS: Support for carbon capture
The £20 billion in funding for carbon capture has received some support from the energy sector, with the technology helping to limit emissions from bioenergy, gas and industry as part of the transition.
“Today the government has indicated that net zero and the clean energy transition are firmly on the priority list. Low carbon energy projects have a vital part to play in the energy transition, so we welcome the Chancellor’s plans to invest £20bn in carbon capture, utilisation and storage (CCUS). This investment would be a positive step forward, not least because it would create green jobs across the country. However, we had hoped to see a greater commitment to investment and innovation in the energy storage industry, a proven technology that is already supporting the UK’s net zero targets,” said Chris Wickins, Field’s technical director.
“And while the investment in carbon capture and nuclear is in many ways the headline announcement today, its impact will be muted without investment in the grid we’ll need to connect it to. That’s why it’s vital that National Grid and Ofgem keep up the good progress that has been made on grid connection reform. Doing so is key to unlocking the potential of the investment announced today.”
New nuclear receives mixed reactions
The other winning technology within the Spring Budget was nuclear, with additional focus on small modular reactors in particular, although this has received mixed reactions.
“This budget seems to be overweight and over reliant on nuclear power for when the sun doesn’t shine and the wind doesn’t blow,” said Jo-Jo Hubbard, CEO of Electron.
“This single technology focus seems not to recognise that a) there are already three times as many MWs waiting to be connected to the grid than we need for secure Net Zero power supply; b) battery storage and flexibility, coupled with excess renewables, also solves the same issue, and c) new nuclear will take over ten years to come online. What we really need, in short order, is to connect new clean energy assets to the grid faster (taking a good look at the connections queue in the process) and to use existing grid and generation infrastructure more efficiently through local flexibility markets. We are concerned that this is not the fastest route to customers accessing lower cost lower carbon power. Especially as the sticking plaster that is the energy price guarantee is about to wash off.”
Ultimate lack of support dubbed ‘missed opportunity’
Despite some areas of growth however, there was an ultimate lack of support for clean energy which has been criticised by many at such an important point for the industry.
“Today’s budget lacked the decisive support that the energy industry needs to deliver net zero. This only puts more expectations and urgency on the much-anticipated update to the energy strategy in the response to the Inflation Reduction Act. Today was a missed opportunity to double down on immediate support to households to actively lower emissions,” said Sam Hollister, head of Markets and Engagement, LCP Delta.
“While decarbonising the UK’s electricity generation has attracted the attention today, there remain huge gaps in wider support that directly impact the way that consumers interact with energy. Decarbonising how we heat our homes has to be higher up the agenda and backed by tangible action. With relatively minimal up take of domestic low carbon heating solutions currently, and questions around hydrogen’s future role in home heating, a greater emphasis needs to be placed on the measures that homeowners can do now – and that’s insulating their homes. The UK has the leakiest housing stock in Europe and the solutions to fix this problem already exist. Government support is critical in overcoming this challenge by supporting homeowners in funding these improvements which will ultimately reduce energy bills and help with the UK’s energy security.”
