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Spring Budget ignores calls for renewable energy tax breaks in favour of new green technologies
The UK Chancellor has announced funding for carbon capture, usage and storage (CCUS) and nuclear power plants in a Spring Budget devoid of new incentives for wind and solar projects.
Chancellor Jeremy Hunt unveiled up to £20bn of funding for early deployment of CCUS to develop “another plank of our green economy”.
The Spring Budget clarifies that the funding will “help meet the government’s climate commitments” with a shortlist of projects to be announced later this month.
Hunt also used the Budget to classify nuclear as “environmentally sustainable” and confirm the technology will have the same investment incentives as renewable energy.
Underlining the government’s nuclear ambitions, Hunt unveiled the launch of Great British Nuclear, a state-owned company that will support new nuclear builds to provide 25% of the country’s electricity by 2050.
The company will initially focus on co-funding small modular reactors but gigawatt-scale projects will be considered in future. Hunt congratulated Secretary of State for the Department for Energy Security and Net Zeo Grant Shapps for his “energetic” representations on behalf of the scheme.
The Budget will come as a blow to renewable energy developers who had hoped for reforms to the Electricity Generator Levy.
There was also no clarity on the fate of the offshore wind farms that secured Contracts for Difference in 2022. Orsted this month warned its plans to build the 2.9GW Hornsea 3 offshore wind farm in the North Sea would be at risk unless the government offered tax breaks to offset soaring costs.
However, the Chancellor has left the door open for further announcements in March. “In addition to the measures in the Spring Budget, the government will set out further action later this month to ensure energy security in the UK and meet our net zero commitments”, the documents note.
Phil Smyth-Tyrrell, Head of Wind at Ramboll UK, said he would have liked to have seen more from the government on the threat of cost escalation "dampening or killing" offshore wind projects.
He added: “More tax breaks for investment in energy infrastructure are also desperately needed. It’s important not to lose sight that the government has more “levers” to pull than simply spending tax money or reducing tax burdens. Predictability and risk are huge issues in the offshore wind sector with insufficient predictability around the timing of offshore wind farm licensing by the government.
"The sector is not currently able to accurately predict when the wind farm developments are taking place due to the vague and unreliable licensing and CfD rounds. These must be run like clockwork to allow the entire sector throughout the supply chain to grow as rapidly as needed to meet demands and ambitions."
James Basden, Co-founder and director of energy storage firm Zenobe added: "We are disappointed with the clean energy package unveiled in today’s budget, which failed to acknowledge key barriers faced by renewable energy developers or the essential role energy storage plays in safeguarding energy security.
"Instead of promoting the clean, green technologies that will get us to net zero, the measures prioritise carbon capture and storage and nuclear, expensive and polluting technologies that will not transform the energy system at the pace and scale needed.
"Classing nuclear as a ‘sustainable investment’ ignores the vast long-term costs and hazards of decommissioning reactors and storing radioactive waste.
"Focus should be placed on cheap renewable energy sources and energy storage technologies to support them, which balance out intermittent renewable generation, storing clean power for still and sunless periods.
"Crucially, the measures do not go far enough to cement our position as world leaders in renewable energy or counteract the effects of the Inflation Reduction Act and EU Net Zero Industry Act, which are diverting talent and money to more competitive markets abroad.
"Today’s announcement was a landmark opportunity to win back the confidence of the nation, investors and the world, but the government needs a more strategic plan.
"As the pace of the global green race accelerates, we need to prioritise the technologies we know work well and remove the barriers to deployment, or we risk getting left behind." |
