This afternoon, Chancellor Jeremy Hunt announced new changes with the Spring 2024 Budget. Here’s your quick look at the changes we’ll see in energy and low-carbon technologies.
Energy Profits Levy extension
The Energy Profits Levy (EPL) was introduced in 2022 to ensure that oil and gas producers in the UK pay their fair share of tax from extraordinary profits. The government confirmed it is extending the EPL by an additional year until March 2029, raising £1.5 billion. To put beyond doubt that the EPL is temporary, the government will include legislation in the Spring Finance Bill to disapply the levy when prices return to normal.
National Business Energy Advice Service
In the West Midlands, a pilot Business Energy Advice Service is underway – which offers free energy audits to SMEs, followed by the opportunity to apply for matched grant funding for energy efficiency upgrades. While no update was given on this, the Budget document confirmed that the government is closely examining the findings from a pilot, with a view to expanding support nationwide.
Contracts for Difference funding allocated
The government has set a budget of over £1bn for the latest round of Contracts for Difference funding (AR 6). With the full parameters now published, the document highlights 3 new rule changes. The full set of changes can be found on the government website.
Update to the nuclear SMR competition
Originally announced in October 2023, the Small Modular Reactor Competition was designed to help the UK push forward as a leader in nuclear energy. Compared to traditional nuclear sites, SMRs are much quicker to build and can be mass manufactured. Now, the government has announced that they have moved to the next stage of the Small Modular Reactor competitive process, with six companies invited to submit their initial tenders by June.
The government has also confirmed a deal to continue its nuclear progression by purchasing the Wylfa and Oldbury sites from Hitachi for £160m. This deal aims to secure further nuclear sites for the UK, though no decisions have been made regarding specific projects.
Green Industries Growth Accelerator (GIGA)
Following on from Autumn Statement 2023 announcements to drive the growth of the UK’s green industries, the government is announcing a further £120 million for the Green Industries Growth Accelerator (GIGA), to support expansion of low carbon manufacturing supply chains across the UK.
Of over £1 billion of total funding available, up to £390 million will support supply chains of offshore wind & electricity networks. The same amount will support supply chains of Carbon Capture Utilisation and Storage (CCUS) and hydrogen.
Grid connection reforms
Grid access delays are a growing problem for the UK’s renewables sector – and this was a core focus of Autumn Statement 2023. Since November, over 40GW of energy projects have been offered earlier grid connection dates, and the Electricity System Operator is inserting delivery milestones into over 1,000 connection contracts to remove stalled projects from the queue from this autumn. In addition, network companies have announced investment programmes, framework agreements and tenders worth up to £85 billion.
The Chancellor used Spring Budget 2024 to launch a taskforce, to be chaired by the Rt Hon Julian Smith CBE MP, to explore Alternative Dispute Resolution mechanisms for disputes on compensation between landowners and electricity network operators.
Later this month, the Electricity System Operator is publishing the transitional Centralised Strategic Network Plan which is expected to stimulate up to £60 billion additional investment in the GB network.
We’ll also see a new community benefits guidance document by June 2024 and a new public register of community benefit packages.
In autumn 2024 we are set to hear more on the implementation of a new stringent connections process from January 2025 so that projects are only offered a specific connection date when they are ready to progress.
The government says it is also working with the Electricity System Operator to outline further reforms by summer 2024, raising barriers to entering and remaining in the queue. This will build on Ofgem’s decision later this month on whether to introduce a requirement for a landowner letter of authority to join the queue.
The government also wants to ensure strong incentives for network companies. Ofgem will review the regulatory framework for connections and make recommendations by June 2024, including considering if changes are needed to make sure that connection offers reflect the reduction in transmission infrastructure delivery times from 14 years to 7 years.
