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Spring Budget Review 2024


Spring Budget 2024

Chancellor Jeremy Hunt delivered the government’s Spring Budget yesterday which laid out the government’s taxation and spending plans for the next 12 months in what is expected to be the final financial statement before the next general election.

Among the headlines, dominated by a further 2p cut to National Insurance, changes to the nom-dom tax regime and an increase to the salary threshold for claiming child benefit, there were several measures announced that will directly impact the future direction of the UK energy industry.

Nuclear capability

A key announcement from the Chancellor yesterday signalled further commitment to delivering energy security and a decarbonised power sector. With plans to ensure a quarter of UK power generation is met by nuclear reactors by 2050, an invitation has been issued to six companies to submit their initial tender responses by June this year for the design of Small Modular Reactors (SMRs) that will make this target possible.

The government announced it has also reached agreement on a £160 million deal with Hitachi to purchase the Wylfa site in Ynys Môn and the Oldbury-on-Severn site in Gloucestershire, though no final decision has been taken on the potential development of these sites for new nuclear power stations.

Grid reforms

Following on from last year’s Autumn Statement, the government has also published its consultation on a new accelerated planning service for major commercial applications, including reforms to implement faster connections to the national electricity grid.

The government is set to outline further interim reforms to the grid queue process by this summer, following work with the Electricity System Operator which will see a new connections process implemented from January 2025.

The government will also establish a new National Energy System Operator in 2024 to deliver its grid reforms and improved system coordination by means of a new Strategic Spatial Energy Plan. Meanwhile, the Department for Energy Security and Net Zero (DESNZ) will introduce a full cost recovery consultation for planning casework to boost capacity and ensure timely decisions as the volume of applications increase.

Further measures announced yesterday include:

  • An extension to 2022’s Energy Profits Levy (EPL) on the excessive profits of oil and gas companies that operate in the UK or on the UK Continental Shelf (UKCS) by an additional year until March 2029, raising the Treasury £1.5 billion.
  • Publishing the full parameters for the Contracts for Difference (CfD) Allocation Round 6 (AR6), including setting the largest ever budget for a single round of over £1 billion, in order to generate more homegrown sources of clean power to boost our energy security and reduce emissions as part of the 2030 target for 50GW of offshore wind.
  • A commitment to remove the prepayment meter (PPM) premium charged to households following the end of the Energy Price Guarantee (EPG) in March 2024.
  • Confirmation that the government will introduce a Carbon Border Adjustment Mechanism from the 1st of January 2027 which will apply to relevant goods imported in the aluminium, cement, ceramics, fertiliser, glass, hydrogen, and iron & steel sectors, subject to public consultation later in 2024.
  • A further £120 million for the Green Industries Growth Accelerator (GIGA), to support expansion of low carbon manufacturing supply chains across the UK, on top of the £960 million funding announced in the Autumn statement. Around £390 million is expected to support supply chains of offshore wind & electricity networks and the same amount for supply chains of Carbon Capture Utilisation and Storage (CCUS) and hydrogen. This funding is in addition to the £300 million already allocated to nuclear fuels for the High Assay Low Enriched Uranium (HALEU) programme.
  • The regulation providers of Environmental, Social and Governance (ESG) ratings to users within the UK with ESG ratings providers brought into the regulatory perimeter of the Financial Conduct Authority.
  • Funding of £150 million for Green Future Fellowships through endowments to the Royal Society and the Royal Academy of Engineering.
  • The provision of targeted funding for consultations and calls for evidence to accelerate data schemes in energy and transport.

Business response – did the Chancellor go far enough?

As ever, the response from business to the proposals was mixed, with some welcoming further investment in the UK energy industry, while others felt it was a missed opportunity to promote further energy efficiency measures and the uptake of electric vehicles.

In response to the Chancellor’s announcement, Emma Pinchbeck, Chief Executive of Energy UK, said: “the Government has listened to the energy industry about the need to deliver on the country’s ambitions for low carbon power with plans to deliver greater capacity from established renewables technologies like solar, onshore and offshore wind, as well as investing in new, emerging technologies like tidal, geothermal and floating offshore wind.

RenewableUK’s chief executive, Dan McGrail, added: “the increase in GIGA funding to secure further private investment in green manufacturing jobs will enable us to supply more goods and services to projects here and abroad. It’s also good to see that nearly £400m of that funding will be used specifically to grow our offshore wind supply chain and electricity networks.”

Alasdair Johnstone, from the Energy and Climate Intelligence Unit, was less impressed however, stating: “the net zero economy grew 9% last year, whilst the wider economy was stagnant. The Chancellor appears to have not got the memo. At a time when the US and EU are competing over investment in clean industries, there was little in here to attract investment in clean industries. Speeding the deployment of renewables, the insulation of homes, the rollout of heat pumps and the uptake of EVs would also boost our energy security, protecting the UK from volatile oil and gas prices.

 “The OBR has today pointed out that disruption in the Middle East could lead to a surge in energy costs and lead to the borrowing of billions, billions on top of those that the government needed to cover the current gas crisis.”

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