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Budget 2020: Investment falls short of ‘strides’ needed for net zero

Image: HM Treasury.

Image: HM Treasury.

The much anticipated Budget has confirmed investment in electric vehicle infrastructure, carbon capture and storage and nuclear fusion.

Chancellor Rishi Sunak, just a month into the job following February’s cabinet reshuffle, presented the nation's Budget today (11 March) under the shadow of the COVID-19 (coronavirus) outbreak.

Whilst this took the prime place within the Budget, many in the energy and environmental sectors were hopeful that as the need for action on climate change continues to grow, it would form a substantial part of the document.

There were some big winners in the energy sector within the Budget, with EVs, CCS and nuclear all receiving investment, however, once again renewables have been overlooked.

The Renewable Energy Association's Dr Nina Skorupska said that whilst the Budget provided some welcome fiscal support for the renewable energy, it “does not make the strides needed to fully unleash the potential of the sector and pave the way to net zero".

“With the declared climate emergency, the government needs to take decisive action to produce a whole-government net zero Strategy that includes a detailed, funded and measurable roadmap that delivers the wholesale systems-change required to decarbonise the economy, and then ensure that we have an effective taxation system that protects natural capital, and incentivises renewable energy and clean technology beyond fossil fuels," she continued.

As Sunak mentioned at the beginning of his speech on the Budget, it is the first of this decade, the first following the UK leaving the EU and the first of this new government, setting the tone for the post-net zero UK. Many in the industry are therefore feeling deflated by its lack of ambition for energy and the power sector.


Half a billion to further drive the EV rollout

One of the Budget's big winners was EVs, with confirmation of £500 million worth of investment over the next five years to support the rollout of infrastructure. This was initially mentioned in the Conservative party’s manifesto, however today’s Budget adds the detail that it will be a fast-charging network.

“Drivers will never be further than 30 miles from a rapid charging station,” the Budget states.

As part of this investment, the government is creating the Rapid Charging Fund, which will help businesses to connect fast charge points to the electricity grid.

The Office for Low Emission Vehicles (OLEV) will complete a comprehensive review of EV charging infrastructure to ensure that this investment is best targeted. This will build on previous research undertaken by the government, and announced in July 2019.

The review will expand the scope of research to cover the full Strategic Road Network, as well as looking at strategic locations in cities and rural areas.

As part of OLEV's Go Ultra Low scheme, infrastructure is already being funded in London, with local councils and Transport for London announcing a £4 million investment into EV charging points at the end of last year.

Such spending on infrastructure comes after the Electric Vehicle Energy Taskforce called on government and industry to support the rollout of greater EV infrastructure as part of its proposals announced in January.

Investment in the UK’s EV infrastructure network has grown substantially, aided by the governments £400 million Charging Infrastructure Investment Fund (CIIF), announced last year. This public and private partnership is also looking at the areas most in need of infrastructure, whilst targeting all charging speeds, not just rapid charging alone.

The pace of the EV rollout is clearly growing, with the importance of greening the UK’s transport network evident by the key position EV’s have been placed in in the Budget.

Additionally, government will provide £403 million for the plug-in car grant, extending the scheme - first launched in 2011 - to 2022-23.

This will mean that zero-emission cars that are priced below £50,000 will be eligible to receive a grant of up to £3,000, whilst vans can access up to £8,000, large vans and trucks up to £20,000, taxis up to £7,500 and motorbikes up to £1,500.


CCS: ‘New opportunities’ for the decarbonised economy

Another technology set to receive increased funding is CCS, with the Budget announcing a CCS Infrastructure Fund. This will be used to establish CCS in at least two UK sites, with the Budget also announcing the government will support the UK’s first privately financed gas CCS power station, which will be funded using consumer subsidies.

The first of the two CCS hubs will be constructed by the mid-2020s, and a second by 2030.

CCS is again a technology championed by the Conservative party throughout last year's election, and into the Queen's speech.

The new CCS Infrastructure Fund will consist of at least £800 million, but the exact amount is yet to be set, with budgets to be finalised at the CSR.

Will Gardiner, CEO of Drax, which is deploying CCS alongside bioenergy, said: “The funding pledged today for the development of two or more carbon capture and storage clusters demonstrates the government’s commitment to communities and businesses in the North - ensuring the region is well placed to take advantage of new opportunities created by a decarbonising economy.”

Like EVs, the CCS sector has been picking up pace in the UK, as although it is still a nascent technology, it is increasingly in the limelight.

In June 2019, Tata Chemicals Europe announced that it would build the UK’s first industrial-scale Carbon Capture and Utilisation (CCU) demonstration plant, after receiving £26 million of government funding.

The government then announced £170 million to deploy CCS and hydrogen networks in industrial clusters in July 2019.

However, CCS has previously been criticised by groups who view it as too far from competitiveness.

In a report produced by the Centre for Alternative Technology (CAT), the UK's ability to achieve net zero without CCS, relying only on technologies available today, is outlined. This, said the CAT's Paul Allen, would allow the UK to reach net zero without relying on "speculative" future technologies such as CCS, as to do so could risk overshooting the remaining carbon budget.


Nuclear fusion, business rates and the carbon tax

Generating technologies barely got a look in in today's budget, much to the disappointment of much of the sector.

One technology that will be receiving funding is nuclear fusion, as the Budget includes the long-touted low carbon technology within its £900 million high-potential technologies funding. How much of this nuclear fusion will receive remains to be seen, sharing the investment with the government’s National Space Strategy and space innovation fund.

While nuclear fusion will therefore continue to be a focus for the country, nuclear fision was absent from the Budget. Currently there is only one new build nuclear project underway, Hinkley Point C, despite a large amount of the country's fleet set to come off the network in the coming years.

Other generating capacity, such as solar and wind has been omitted from the Budget. This may have been influenced by the announcement of a Pot 1 Contracts for Difference auction last week, a long-awaited move by the government to support onshore wind and solar.

Funding for the Energy Innovation Programme, which helped fund Tata’s CCS project, is set to double, it was announced in the Budget.

“Increasing the UK’s use of clean energy is a vital part of reducing carbon emissions and putting the nation at the forefront of new innovative industries,” the Budget reads.

Whilst solar power wasn’t mentioned in the Budget – appearing only once in the entire 125 page document in order to illustrate why there is increased funding for nuclear and CCS – a review of business taxes is being welcomed by the industry.

These have been largely criticised as one of the biggest barriers to an expanded rooftop solar industry in the UK, after they were changed in 2017. Companies such as Lidl have since seen their rate soar by 528%, dramatically reducing the attractiveness of the technology.

The Solar Trade Association has been one of the chief critics of this change to tax, and chief executive Chris Hewett has said he “welcomes the decision to hold a review of business rates, which are the main barrier to the deployment of large rooftop PV".

Finally, the government confirmed in the Budget that it will freeze the rate of the Carbon Price Support at £18t/CO2 e in 2021-22. This is designed to encourage the decarbonisation of the power sector, with the UK’s electricity network due to be net zero by 2025.

Carbon pricing throughout the Brexit transition period is yet to gain clarity, repeating the promise announced in 2018’s Budget that the government is looking to legislate for a carbon emissions tax as an alternative carbon pricing policy.

It will consult on the design of a tax in spring 2020, and the UK Emissions Trading Scheme will be legislated as part of the Finance Bill and linked to the EU’s equivalent.

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