With energy bills rising as the temperature drops, all eyes were on the Autumn Statement this morning. Chancellor Jeremy Hunt confirmed that the UK is officially in recession, and stressed that while there were ‘no easy answers’, energy independence and energy efficiency were key to addressing the cost of living crisis.
Here’s everything you need to know about the energy and low carbon announcements.
Review of the Energy Bill Relief Scheme (EBRS)
Implemented by Liz Truss during her time as Prime Minister, the Energy Bill Relief Scheme provides financial support to help non-domestic energy users in Great Britain with soaring energy costs. After further review, the government will keep the scheme albeit with various adjustments.
Even though the government “recognises that some businesses may continue to require support,” the amount of support provided by the government will be “significantly lower” and will target those who are the most affected. These adjustments will be made after 31 March 2023 based on what the government can offer in order to promote financial stability and value for money for the taxpayer.
The Energy Price Guarantee (EPG) will remain throughout the winter
Announced during the “mini budget” this September by Ms Truss, the Energy Price Guarantee caps household energy bills in Great Britain to £2,500 per year. After review, Mr Hunt announced that the price cap will remain and outlined its future.
From April, the cap will rise by £500 to £3,000 and will save £14 billion of government spending. Northern Ireland will also receive equivalent support.
The EPG will help to minimise the peak of inflation. It will also be reviewed and amended as necessary after April 2023.
Windfall taxes on energy profits
The Energy Profits Levy (EPL) will be increased by 10 points to 35% and extended to the end of March 2028, and a new, temporary Electricity Generator Levy (EGL) of 45% will be applied on outstanding returns being made by low-carbon electricity generators. Essentially, this means that energy companies receiving large amounts of excess income will pay tax for which they are not responsible, hence the term ‘windfall.’
Oil and gas firms have seen sky-rocketing profits. From July to September, BP made a staggering £7.1 billion, which is more than twice as much than they made in the same period during 2021. Similarly, Shell announced global profits of £8.2 billion for the same period, compared to $4.2 billion last year.
Now, the government is aiming to curb such steep profits on energy intensive industries. Tax will be applied as of 1 January 2023 and is limited to companies whose in-scope generation output is above 100GWh during a period and is only applicable to returns above £10 million.
Energy Efficiency Taskforce (EEFT) and a new energy efficiency target
The Chancellor announced a new ambition to reduce energy consumption by 15% by 2030 (against 2021 levels), with plans offered by means of public and private investment, as well as a variety of no-cost or low-cost measures to reduce energy usage. It aims to reduce bills for households, businesses, and the public sector. Funding of £6 billion will be made available from 2025 to 2028, in addition to the £6 billion already provided by parliament. EEFT will be responsible for the delivery of this target.
Delivery of a new nuclear powerplant, Sizewell C
The UK aims to stabilise energy security via the delivery of nuclear powerplant Sizewell C (the first state-backed plant in 30 years), which will create 10,000 new jobs. This will also be paired with an initiative for the “roll-out of cheap, clean renewables, including wind and solar.”
VED on Electric Vehicles
Electric cars, vans, and motorcycles will begin paying Vehicle Excise Duty (VED, also know as ‘road tax’) from April 2025 in the same way that petrol and diesel cars do. The first year of registration on or after 1 April 2025 will see the lowest VED rates which start at £10, and is based on how much carbon dioxide the vehicle emits. Then the second year will resume the standard price, which is currently £165. As consumption of EVs continues to rise, Mr Hunt said users must pay “fair tax contributions.”
Climate Change Levy (CCL) rates rebalancing
The government will legislate in Spring Finance Bill 2023 to raise the CCL main rate on gas to £0.00775/kWh whilst freezing the CCL main rate on electricity at £0.00775/kWh in 2024-25. The CCL main rate on solid fuels will rise in line with the increase in the CCL main rate on gas to £0.06064/Kg in 2024-25. The government will maintain the CCL main rate on LPG at £0.02175 in 2024-25.
Climate Change Agreement scheme
The percentage discount on the CCL main rates available through the Climate Change Agreement scheme will be fixed at 92% for electricity and 77% for LPG. The discounts for gas and solid fuels will be adjusted to 89% to produce an RPI increase from 2023-24 into 2024-25.
Carbon Price Support (CPS) rates and review
The government will maintain CPS rates in Great Britain at a level equivalent to £18 per tonne of carbon dioxide in 2024- 25. The government will engage with industry and conduct a review of the CPS beyond the announced rates.