Autumn Statement 2016 – future energy policy unclear

Autumn Statement 2016 – future energy policy unclear

Chancellor Philip Hammond has delivered his first Autumn Statement, which was ultimately light on energy-related updates. This is despite strong rumours that the Carbon Price Floor would be scrapped, and expectations of clarity on the Levy Control Framework beyond 2020.

In the Autumn Statement 2016 there was little shift in Government energy policy compared to the Spring Budget. The Chancellor confirmed that the Carbon Price Floor will remain frozen to 2020. However, there was no indication of its future beyond this point. There was a similar delay for the Levy Control Framework (LCF) which will have to wait until next year’s budget.

The theme of the Autumn Statement 2016 was largely centred on boosting productivity across the UK and investing in infrastructure to help underpin growth. As part of this, the UK renewed its commitment to decarbonisation. Research and Development (R&D) funding is set to increase by £2bn a year by 2020/21. In addition, a new £23bn Productivity Investment Fund was announced focusing on four areas of housing, transport, digital communications and R&D.

What about energy policy?

£390m of funding has been pledged to support ultra-low emission vehicles, renewable fuels and autonomous vehicles. However, there was no indication as to where the wider energy market would fit into these plans. The Government is focused on attracting £100bn in private investment to the UK energy sector over the next 15 years. However, details of future investment plans for interconnection, battery storage, carbon capture and demand response are all still unclear at this time.

The Statement was light on any long-term strategy or direction for the UK energy industry. There were no references to the opportunities and benefits offered by energy efficiency.

However, the Statement did provide a boost to the UK’s drivers, with a £1.3bn investment in reducing congestion on local transport networks. The Chancellor has also scrapped a planned increase in the fuel duty. This tax will be frozen for the seventh consecutive year, which is the longest freeze in forty years.

With the Autumn Statement 2016 providing little change, the reaction within the energy industry has been muted. Long-term power prices have risen around 2% this afternoon (23 November) following confirmation that the Carbon Price Floor will remain in place. However, the impact in the wider energy markets has been minimal.

Veronica Truman

Posted by on Wednesday, the 23. November at 16.34

Veronica Truman has been working in the energy industry since 2002 and currently manages the Market Intelligence, Analytics and Bureau Teams for Utilitywise. These teams are responsible for bespoke strategic consultancy projects for their clients, as well as delivering detailed analytics on clients’ consumption data. In addition to this, the Analytics team have developed models to forecast commodity and non-commodity charges out to 2040, and a market-leading Triad forecasting model.