The Chancellor’s Spring Budget opened with a buoyant but cautious tone: “The UK economy is on the right track… but we remain vigilant.”
Jeremy Hunt was keen to stress that this was a Budget for long-term, sustainable growth, and in doing so framed his energy announcements within the context of the cost-of-living crisis and shoring up energy security.
We’ve put together a roundup of the main energy announcements:
Energy efficiency
The Chancellor announced a £63m “Swimming Pool Support Fund” – £23 million of which will provide immediate support for facilities struggling with energy bills. The remaining £40 million of funding will be to help facilities invest in energy efficiency measures. We will update you when further details become available.
There was also an announcement of £100 million for charities and community organisations in England. This will be targeted towards those organisations most at risk, due to increased demand from vulnerable groups and higher delivery costs, as well as providing investment in energy efficiency measures to reduce future operating costs.
In terms of energy efficiency tax breaks, the Super-Deduction tax scheme ends 31 March 2023, and the 50% First Year Allowance (FYA) scheme was due to end at the same time. However it will now be extended to 31 March 2026, with a view to making it permanent. It lets taxpayers deduct 50% of the cost of other plant and machinery, known as special rate assets, from their profits during the year of purchase. This includes long life assets such as solar panels and thermal insulation on buildings.
The government has also published a call for evidence on options to reform the VAT relief for the installation of energy saving materials in the UK. The call for evidence will consider the inclusion of additional technologies and the possible extension of the relief to include buildings used solely for a relevant charitable purpose.
CCA scheme extension
The government confirmed it will extend the Climate Change Agreement scheme by two years. Participants that meet agreed energy efficiency targets will be entitled to reduced rates of Climate Change Levy in 2025-26 and 2026-27. The extension will be open to new participants in currently eligible sectors, too. The Department for Energy Security and Net Zero (DESNZ) will consult on the details of the extension and proposals for any potential future Climate Change Agreement scheme.
Renewables investment
In terms of low carbon technology, Carbon Capture, Utilisation and Storage (CCUS) and nuclear were the big ticket announcements.
Up to £20 billion funding will be provided for early deployment of CCUS, to help meet the government’s climate commitments. A shortlist of projects for the first phase of CCS deployment will be announced later this month. Further capture projects will be able to enter a selection process for Track 1 expansion to be launched this year, and 2 additional clusters will be selected through a Track 2 process, with details announced shortly.
The government is also set to launch a “Great British Nuclear” (GBN) scheme to address constraints in the nuclear market and support new nuclear builds as the UK works towards net zero. GBN will launch the first staged competition for Small Modular Reactors with an ambition to select the leading technologies by the end of this year, and if demonstrated to be viable the government will co-fund this new technology for the UK.
Nuclear energy will also be rebadged as sustainable, by being included in the green taxonomy, subject to consultation. Small Modular Reactors will be the initial focus of GBN, but further Gigawatt-scale projects will also be considered in future.
