Ed Miliband’s Department for Energy Security & Net Zero did quite well in the October Budget, with a 35% capital uplift for 2025/26, although not much of that will go to new renewables- just £134m to support the delivery of port infrastructure to facilitate floating offshore wind and backing for 11 green hydrogen projects in industrial sites around the country. That’s welcome, so is the £1bn for small scale local renewable projects. But it’s still quite small compared to the main funding allocations for 2025-26, which went to Carbon Capture, Utilisation and Storage, a massive £3.9bn, and to nuclear, with £2.7bn for the initial phase of the Sizewell plant programme, plus, announced later, around £1bn for the winning Small Modular Reactors in the UK SMR competition.
However, there was also, as the first step in the Warm Homes Plan, a provision of over £1 bn in 2025, and to provide supply chain certainty, a guarantee of investment of an initial £3.4 bn towards heat decarbonisation & household energy efficiency between 2025-26 and 2027-28. That takes the total for the large allocations to over £11bn. In addition though there are other smaller allocations, taking the DESNZ total to around £14bn.
So it is not all bad news - and there will be a new investment rule that will allow more private and public investment money to fund green energy projects in future. Though not before time, Ed Matthew, from the climate thinktank E3G said: ‘after years of flatlining investment, the government must now seize the opportunity of the investment rule to make the UK a clean energy superpower and boost green homes investment further. It’s the economic opportunity of the century.’
Industrial reactions were mixed but mostly favourable. George Morrison, CEO of offshore energy engineering firm Aquaterra Energy, said the commitment to green hydrogen was a ‘promising nod toward the future of the UK energy sector’, with hydrogen being one option for new jobs as oil and gas employment declines. Shraiya Thapa, clean energy knowledge lead at national law firm Freeths, also touched on this, noting that the budget emphasises spending across the ‘length and breadth of the UK’, particularly in industrial heartlands, which ‘will be crucial for the supply chains and green jobs which are needed for clean power 2030. The government will no doubt be keen to embed links here between these investments and a just transition for oil and gas workers.’
It is interesting then to tie these reactions in with what has been revealed in recent surveys of what industrial leaders think about the energy transition. Research by Economist Impact found that the vast majority of the 1000 surveyed (79%) anticipated more opportunities than challenges, but felt that rapid progress to a lower carbon economy was crippled by the failure of companies to develop and source sufficient green skills, with 62% of global business leaders saying shortages in green skills will create bottlenecks that will delay the green transition, with big changes in training provision and other initiatives being called for. Just what I have been saying in some of my recent posts. Fortunately though, the Economist Impact study found that some companies were responding well, with, for example, 55% of its sample actively reskilling and/or upskilling its existing workforce, and 51% targeting the recruitment of new employees who possess relevant green skills. Indeed, interestingly, according to the Economist Impact study, most business leaders believed that responsibility for driving the green transition rests with the private sector rather than policymakers.
Well that may be a bit debatable, given, for example, the resistance to action on emissions by some oil and car companies at least in the past, but things are changing. Although not always fast. And governments too are also it seems sometimes loath make big changes, for example in vehicle fuel charges, since they fear voter backlashes. So once again, the new UK budget ducked it- and there were then hostile reactions to it leaving vehicle fuel duty levy unchanged. Carbon Brief noted that ‘fuel-duty cuts & freezes have cost the Treasury a cumulative total of some £100bn since 2010’. It’s going to take a while for things like this to change... and the outcome of the US election isn’t likely to help much!
And even before that, an interesting review of the Economist Impact study claimed that, although action on climate was vital, ‘you can count the U.S. government out—the divisiveness there prohibits substantial action of any kind’. It said the study indicated that maybe that didn’t matter since ‘most business leaders believe that responsibility for driving the green transition rests with the private sector rather than policymakers’. Perhaps a bit optimistic! Though the study did say that view was particularly clear in the US. And it is true that, although during his last presidency, Trump tied to cut back on most things green, many US companies went the other way on energy, being convinced that there were profits to be made. Some state and civic authorities, worried about local climate change impacts, did the same. Maybe it will be the same this time, when, you might think, the issues are even clearer- with local power regulators also often playing a key role. But given that Trump is something of a policy maverick, who knows?
Meantime, what next back in the UK, where, though not ideal, at least we arguably now have somewhat more progressive policies? ‘Making Britain a clean energy superpower’ is one of the new governments five missions and Great British Energy (GBE) will be at the heart of the mission. It has its detractors, but at least it’s a start, and to kick-off its work, the autumn budget settlement provided £25m to establish GBE as a company, headquartered in Aberdeen and £100 m of capital funding in 2025-26 for clean energy project development.
With such a big overall programme, including expensive CCUS and increasingly costly new nuclear, that may not be enough! But, in theory, if the GBE bill goes through, it will be able to help steer some of the £8.3 bn the government says will be available over the next 4 years for energy investment, along with some of the £7.3 bn allocated to the National Wealth Fund, into sensible energy projects, with the private sector stimulated to help with investment. We shall see...
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