In the UK’s Autumn Budget, Chancellor Rishi Sunak has announced a range of funding measures aiming to increase decarbonisation in the UK’s power sector.
Sunak made the speech on Wednesday, following several questions to Prime Minister Boris Johnson regarding the upcoming COP26 conference. The budget continued the environmental theme in places, promising a £30bn fund for green infrastructure investment.
This includes £1.5bn of total funding for moving the UK toward net zero. Within this, the offshore wind sector will see £380m of unspecified funding, “bosting jobs and investment”.
After years of uncertainty around large nuclear projects in the country, the treasury committed £1.7bn to assisting a nuclear project in reaching a final investment decision. Another £385m will go toward an Advanced Nuclear Fund, which would developing small modular reactors. Alongside this, £120m will create the Future Nuclear Enabling Fund, designed to help companies meet construction pre-requisites.
The Hynet and East Coast carbon capture, utilisation, and storage clusters will receive £1bn of funding as the first cluster to begin operations. Heavy industry and hydrogen producers using these clusters will receive up to £140m to adapt.
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Addressing UK energy and fuel crises
As part of the budget announcement, Sunak promised a $500m “household support fund”, partly intended to help homeowners afford energy costs. Household utility bills have risen since a consumer energy price cap increased at the start of October.
While this gave utilities greater financial security, it has pushed some consumers into financial difficulties. The tariff cap for an average household increased by approximately £139 per year, or 12% of previous prices. With electricity and gas prices staying high, another price cap increase early next year seems likely.
The chancellor also announced he would not change fuel duty taxes, despite previous plans for an increase. UK fuel duty has now remained static for 11 years, remaining the highest in Europe. A rise in VAT means that retail fuel prices will still increase next year. Nonetheless, a relatively cheap market price keeps UK fuel prices roughly in line with other European countries, although prices currently sit at record highs.
The cut was announced as part of a package of measures to encourage growth in the logistics industry. UK retailers have recently experienced shortages of various products due to a shortage of goods vehicle drivers. This climaxed in fuel shortages across several areas of the country, which have now eased.
Businesses react to Chancellor’s budget spending
Maria Connolly, head of energy and renewables at TLT solicitors, said: “While the Budget delivered a few good announcements, it was very much lacklustre on the energy transition. It may have followed the Net Zero and Industrial Decarbonisation strategies of recent weeks, which pledged positive albeit still insufficient action, but this does not change the fact that this was a disappointing Budget from the climate perspective.
“There remains a real disconnect between the government’s supposed ambitions on climate change and the methods and financing it is putting in place to achieve its goals. The absence of focus on COP26 and tackling climate change was striking – so much so that one wonders whether Mr Sunak accidentally lost a page from his speech.”
As well as funds for more environmentally-friendly and less energy-intensive construction, the Budget promised £817m to improve supply chains for electric vehicles. Oliver Shaw, CEO of fuel retail software company Kalibrate, said: “The current infrastructure within the UK isn’t ready to support widespread EV adoption; the end of 2020 saw the first of 100 planned electric forecourts in Essex but this needs to be quickened to meet the new government targets.
“The government must continue down this road of providing incentives that encourage adoption, while investing in EV infrastructure and providing businesses with the funding opportunities to play their part in enhancing the UK’s charging network by rolling out facilities at locations that drivers want to visit.”