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Energy and agricultural sectors react to Spring Budget

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Earlier this week Chancellor Jeremy Hunt released his Spring budget, which included plans to expand free childcare, boost pensions and extend the energy price guarantee for another three months.

Mr Hunt also confirmed that the Government will increase the defense budget by £11 billion over the next 5 years. Corporation tax will increase, as previously voiced, from 19 to 25%, and fuel duty will remain frozen, with a 5p reduction maintained for another year. In what Mr Hunt called the “biggest change to our welfare system in a decade” reforms will be introduced to help more disabled people into work, funding will provided for a new benefits programme called “universal support” and £400 million will be allocated for mental health and muscular skeletal support.

During his speech Mr Hunt expressed his desire for greater private investment in nuclear power, by classifying it as “environmentally sustainable”. He also reconfirmed plans to  launch Great British Nuclear, as per the energy security strategy launched in April 2022 by then Prime Minister Boris Johnson, and introduced a competition for small modular reactors, which will be run by Great British Nuclear and “completed by the end of this year”.

Little new was announced on ways to improve the energy efficiency of buildings across the country, something many from across the energy sector have repeatedly called for to assist in the reduciton of bills in the longer term and not just the period covered by the energy price guarantee extension. 

The Chancellor has pledged to allocate “up to £20 billion” to support the deployment of carbon capture and storage technologies before the 2024 election. A call for evidence has been issued by the Treasury proposing the extension of the existing zero VAT rating for solar panels, heat pumps and insulation to battery storage, when either retrofitted to a solar photovoltaic system or fitted as a standalone unit.

Other than this however there seemed to be very little focus on renewable and clean energy technologies, despite the recent calls from the Climate Change Committee for urgent action to help achieve the 2035 target of fully decarbonising the UK’s power system.

Below we round-up some of the reaction from across the energy and agricultural sectors:

The NFU feel that the budget “fails to address the needs of agricultural and horticultural businesses”, with President Minette Batters saying:

“Ahead of the Budget, the NFU was clear that greater support is needed for the thousands of farm businesses which are trying, but struggling, to keep our nation fed amidst soaring production costs. It’s therefore extremely frustrating that the Energy and Trade Intensive Industries scheme was not extended to include energy intensive sectors such as horticulture and poultry.

“It begs the question – where does boosting Britain’s food security fit into the Treasury’s growth plans?”

CLA President Mark Tufnell said:

“After 12 years in charge, it is still difficult to see what – if any – ambition the government has for the rural economy. Rural businesses continue to be held back by apathy in public policy, not least in the planning system that actively holds back entrepreneurs from generating growth.

“The rural economy is 19% less productive than the national average. Closing this gap would add £43bn to the national economy. Nothing in this budget will unlock that vast potential.”

Frank Gordon, Director of Policy at the REA said:

“Government’s commitment to advancing carbon capture and storage is a long awaited and welcome step forward, helping to reaffirm the UK’s global position as leaders in this innovative technology, and see it built at commercial scale. However, government must now set out how further bioenergy with carbon capture and storage (BECCS) projects will be taken forward across all scales. There are over 60 biomass power sites in the UK, representing over 4,500 MW of capacity, all of whom could be looking to CCS to deliver carbon removals.

“While we welcome this support and acknowledge the tough economic backdrop, it was disappointing that the Budget offered no new support for moving to long-term solutions to tackle the energy crisis such as decarbonising heat, energy efficiency, securing investment in Net Zero supply chains in response to US and EU support, no compensatory measures for EV drivers from the fuel duty freeze and nothing on moving to a more Circular Economy.

“Overall, today’s statement marks a missed opportunity as the US and EU push forward in attracting low carbon investment, while the UK risks falling behind.”

Chris Hewett, Chief Executive of trade association Solar Energy UK, said:

“While there are certainly valuable elements, not least on VAT for battery storage, and a short-term opportunity for solar thermal in swimming pools, the Budget was out of step with the mainstream trends in the global energy transition, where investment is pouring into solar, wind and energy storage. The Chancellor appeared to conclude ‘Job done on renewables, now we will focus on CCS and nuclear.’ He’s quite wrong.

“The country is in dire need of public and private investment into reinforcing the transmission and distribution grids. The slow pace of upgrades is pushing the expected completion of some solar projects well into the 2030s. The sector is also suffering from having no investment allowance under the Energy Generator Levy, unlike the benefits showered on the oil and gas industry,” he added.

Scottish Renewables’ Chief Executive Claire Mack: said:

“The renewable energy industry has been short-changed by today’s Spring Budget. We urgently need a framework that will encourage investment in what is one of the UK’s most dynamic and fastest-growing industries and is at the forefront of the clean energy transition.

“We are faced with widespread uncertainty and increasing international competition so we must be much more ambitious if we want to deploy the renewable energy projects we need to safeguard our energy security and meet our net-zero targets.

“Other places in the world will benefit from the unparalleled economic and environmental benefits that clean energy investment promises to deliver and the UK needs to match these incentives.

“That hasn’t happened in today’s Spring Budget but we hope to see further announcements from the UK Government later this month which will ensure the UK remains an internationally competitive investment destination for renewable energy.”

Bio Capital Chief Financial Officer Mary Czulowski said:

“The budget announcement from Chancellor Jeremy Hunt highlights that more needs to be done to support investments into renewable energy technologies. While we have made progress in areas such as wind generation, as we move closer to the UK’s Net Zero target, we must look at other sources of renewable power if the UK is to meet growing demand for energy. More funding for carbon-capture and classifying nuclear as environmentally sustainable will not be enough.

“In a macro environment of unstable energy sources as well as a global shortage of fertiliser, anaerobic digestion is an opportunity broadly overlooked by policymakers despite offering indispensable solutions to these pressing issues and being highlighted in the Skidmore Review as a technology with strong potential. Supporting the investment into renewable bioenergy will be a key part of the UK’s energy transition pathway to ensure we are able to achieve carbon neutrality in less than 30-years’ time. We are also disappointed that the budget has made no changes to the Electricity Generator Levy which applies to generation by renewable sources and acts as a disincentive to investment in renewables.”

The Spring budget can be viewed in full on the Government’s website.

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