On 30 March 2023, the UK Government’s Department for Energy Security and Net Zero published “Powering up Britain”, “the Government’s blueprint for the future of energy” in the UK bringing together the Energy Security Plan and the Net Zero Growth Plan to explain how to “diversify, decarbonise and domesticate energy production by investing in renewables and nuclear, to power Britain from Britain.”
The Energy Security Plan sets out the steps the Government is taking to ensure the UK is more “energy independent, secure and resilient” following the impact on the UK’s energy security caused by the war in Ukraine.
KEY TAKEAWAYS
Great British Insulation Scheme
It is very welcome to see the introduction of a new Energy Company Obligation scheme – the Great British Insulation Scheme (previously known as ECO +) to deliver £1 billion additional investment by March 2026 in energy efficiency upgrades, such as loft and cavity wall insulation, with the aim of laying legislation in the Summer to take it forward. This will contribute to the Government’s target to achieve a 15% demand reduction by 2030. However, although the new scheme will help to insulate an additional 100,000 homes annually, the number is still insufficient given that there are 17 million homes in the UK lacking proper insulation.
Heat networks
The Government is introducing the Heat Pump Investment Accelerator, which is a new scheme worth £30 million that aims to increase private investment by £270 million to enhance the manufacturing of heat pump technology in the UK. The plan also said that the Boiler Upgrade Scheme, which provides a £5,000 grant to individuals purchasing a heat pump, will be extended until 2028. While this is a step forward, the rollout of heat pumps in the UK has been too slow compared to other European countries. The European Heat Pump Association (EHPA) has revealed that the UK has just 280,000 heat pumps installed compared to France which has 3.1 million and Norway with 1.3 million. Additionally, the Conservative party has yet to allocate £2.1 billion, or one-third of the funding for energy efficiency and clean heat as promised in their manifesto. Nevertheless, the Government expects to introduce a regulatory framework for heat networks and begin the implementation of heat network zoning by 2025.
Hydrogen
The Government has announced the first winning projects from the £240 million Net Zero Hydrogen Fund through which it intends to support up to 250MW of new electrolytic hydrogen production capacity. To bring forward hydrogen transport and storage infrastructure business models by 2025, the Government is also aiming to introduce legislative powers “when parliamentary time allows.” These actions are key to potentially unlocking up to £11 billion in private investment by 2030, accelerating the UK hydrogen economy to bolster energy security and potentially supporting over 12,000 jobs by 2030.
Planning
The Government has committed to faster, fairer and more effective planning regimes, including through changes to the National Planning Policy Framework – generally for local plan-making and decisions, the energy National Policy Statements – specifically for nationally significant decisions, and Electricity Act planning. However, the Government has not responded to Skidmore’s recommendation to introduce a net zero test for the planning system.
Carbon Capture, Usage and Storage (CCUS)
The Government has initiated the second phase of Track 1 in its CCUS clustering process, which includes eight projects. In addition, there will be a selection process to include more CCUS projects in the Track 1 clusters by 2030, which will begin later this year.
IMPACT ON BUSINESSES
It is very welcome to see the commitment to pilot a digital energy advice service for small and medium-sized enterprises (SMEs) later this year as well as a new audit and grant scheme allowing small businesses to implement energy efficiency measures.
Additionally, the Government has said that it will work with the new Energy Efficiency Taskforce to drive greater private sector action on resource and energy efficiency. The Taskforce will shortly begin work on developing an action plan which will be published in the Summer.
The Government also announced an extension to the Industrial Energy Transformation Fund (IETF) with the grant funding increasing to £500 million. Phase 3 of the IETF is expected to open for new applications in early 2024, provided that business case approval is granted. This move aims to encourage industry to adopt energy efficiency and low-carbon technologies, leading to reductions in their energy bills and carbon emissions.
Furthermore, the Climate Change Agreements Scheme, which reduces Climate Change Levy rates for eligible businesses in over 50 industrial sectors worth £300 million annually, has also been extended by two years, as previously announced in the Budget.
LONG-TERM POLICY CLARITY NEEDED
Overall, the Energy Security plan contains many positive measures. However, the UK needs long-term policy certainty with a roadmap. Without clear, consistent and long-term policy signals to support decarbonisation, lenders, firms and households cannot have the confidence to take decisions which help develop the supply side for the skills, capacity, and technologies to deliver the significant changes required. Bankers for NetZero hopes that the delivery of a nationwide programme for retrofit becomes a Government priority to reach net zero by 2030.
Contact
Elena Pérez Celis,
Head of Policy Public Affairs
E: elena.perezcelis@bankersfornetzero.co.uk
T: 07522124532
