Autumn Statement - Welcomed, but falls significantly short
In the Autumn Statement, our government emphasised the significance of the net-zero transition for the long-term energy security and prosperity of the UK. However, while the proposed support is welcomed, it pales in comparison to the support provided by other G7 countries.
In this blog, we explore a couple key areas that the government has committed to focus on as part of their pledge to invest in our country’s energy security and achieve net-zero targets, as well as comparing to the commitments from other G7 countries.
- Electricity Generation Levy (EGL) Amendment
In effect since the 1st of January 2023, the EGL was introduced in response to the substantial revenues realised in the electricity market post-pandemic. The EGL, a temporary 45% charge on receipts generated from wholesale electricity production, is triggered when electricity is sold at an average price exceeding £75/MWh over an accounting period. This levy is applicable exclusively to generators whose output surpasses 50GWh annually, with receipts exceeding £10m in an account period.
To support continued investment in the UK’s renewable generation capacity, the government will legislate for a new investment exemption for the EGL in an upcoming Finance Bill. When the decision to go ahead with the creation of a new renewable project or expansion of an existing site is made on, or after, the 22nd of November 2023, these projects will be exempt from the 45% levy.
- Crown Estate Borrowing and Investment Powers
The government will introduce legislation to modernise the Crown Estate’s borrowing and investment powers to bolster the UK’s path to net-zero, including the acceleration of renewable energy through sectors such as offshore wind, as well as creating opportunities for new technologies such as Carbon Capture, Usage and Storage (CCUS) and hydrogen.
As the manager of the seabed around England, Wales, and Northern Ireland, the Crown Estate makes substantial investments to conduct leasing rounds, mitigate risks for developers, and involve a diverse range of stakeholders through ‘world-class data and evidence.’
Once parliamentary time allows for the legislation to pass, the enhanced borrowing and investment powers will facilitate the unlocking of approximately 20-30GW of new offshore wind seabed rights by 2030. Furthermore, it will expedite the development of new floating offshore wind projects in the Celtic Sea throughout the 2030s, contributing an additional 12GW of generation beyond the 4.5GW identified in an upcoming leasing programme.
- How the UK Compares to Other G7 Countries
Alongside the UK, other major economies including the United States and the European Union have shaped their fiscal policies around their transition to renewable energy, recognising the need to displace fossil fuels for environmental and financial benefits.
While the support will be welcomed by all industry participants, the total sum of £960m to be invested in the generation of renewable energy by 2030 has been a point of contention for many. James Murray of BusinessGreen has highlighted that the funding, which won’t be activated until 2025, will struggle to support five different 'clean tech' sectors, and that it is ‘orders of magnitude smaller than what is offered in the US and EU.’
In the US, the Inflation Reduction Act (IRA) seeks to spur investment in green technology by allocating almost $370 billion in subsidies through grants, loans, and tax credits to public and private sector entities. A total of $10 billion has been invested into the Advanced Energy Project Credit (AEPC) by the US government as part of the Inflation Reduction Act. Up to $4 billion will be allocated in the first round of tax credits for projects that expand clean energy manufacturing and reduce greenhouse gas emissions at industrial facilities.
As a response to the US IRA, the EU introduced the Green Deal Industrial Plan (GDIP). The plan is designed to expedite EU net-zero goals through strategic investments and subsidies, aiming to safeguard European industrial competitiveness and manufacturing capacity during the transition to climate neutrality. The European think tank Bruegel placed a figure of €180 billion between 2024 and 2030 to maintain the current level of EU green grants, and €400 billion if 0.5% of EU GDP was contributed to the GDIP.
- In Summary
While the £960m committed to UK renewable energy generation is small, it is important to note that this figure is part of a larger sum of £3.93 billion allocated to decarbonising industries and accelerating net-zero. Over £2 billion will be invested in the automotive sector to support the manufacturing and development of zero-emission vehicles, and £975m in energy efficient and zero-carbon aircraft technology.
Although the support provided in the Autumn Statement for the renewable industry is welcomed, the total figure falls significantly short of the hundreds of billions offered in the US and the EU. For the UK to truly position itself as a leader in decarbonisation and renewable energy, a lot more assurance is needed.
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