All eyes to Autumn, as Spring Budget light on energy developments (again)

All eyes to Autumn, as Spring Budget light on energy developments (again)

Today’s Spring Budget was again light on future guidance for energy policy, with the Chancellor failing to provide detail on long-term plans for the Levy Control Framework (LCF) and the Carbon Price Floor (CPF).

The Spring Budget stated that the existing Levy Control Framework will be replaced by “a new set of controls”. However, detail on this will be set out later this year. The Government is targeting a total carbon price from 2021/22, though further details on carbon pricing beyond 2020 are also delayed until the Autumn Budget. At present the Carbon Price Floor is frozen at £18 per tonne/CO2. From 2020 it will be uprated and we expect this trajectory to continue in the new target, which allows for the UK’s possible departure from the EU ETS. Any alteration in this trajectory will have a significant implication on the long-term investment decisions of energy intensive industries and businesses.

Economic focus

The Chancellor’s speech had a strong economic focus, outlining better employment figures and economic growth than anticipated (given current post-EU Referendum uncertainty). £330m of funding was allocated to local authorities to support businesses most affected by a planned rise in business rates. However there was no mention of exemption or relief for consumption of rooftop solar generation.

The announcement of further support for the oil and gas industry was heavily criticised by environmental groups, particularly with the Spring Budget offering no insight into further plans to cut carbon emissions or tackle global warming. The Chancellor said it was “absolutely essential to maximise exploitation of the remaining reserves” in the North Sea. A discussion paper will be launched reviewing options to assist the industry, with an update to be delivered at the Autumn Budget.

The development of batteries for electric vehicles will benefit from an initial £270m investment into the new Industrial Strategy Challenge Fund. Development of “cutting-edge artificial intelligence and robotics” will also be supported with a view to its use in off-shore wind and nuclear energy.

2017 is a unique year for HM Treasury. The transitional switch to an Autumn Budget and a Spring Statement, outlined by the Chancellor in November 2016, has left the UK in the odd situation of having two budgets this year. The spectre of Article 50 is focussing minds on the short-term, and clarification on the long-term future of energy structures like the Levy Control Framework and Carbon Price Floor is again missing. A strategy on the use of Carbon Capture and Storage technology has also been delayed since Autumn 2016, while BEIS has yet to respond to recommendations on developing tidal lagoon technology.

Spring Budget light on energy developments

This Spring Budget is the second update from HM Treasury with minimal attention on the energy industry. Expectations have been again raised for much-needed progress being delivered later this year.

Utilitywise hopes that the Autumn Budget will finally give much needed clarity.

Ross Moffat

Posted by on Wednesday, the 8. March at 17.03

Ross Moffat has been a part of the Market Intelligence team at Utilitywise since early 2014. His responsibilities include delivering Market Intelligence reports to clients and managing the Utility Insights Twitter account. Ross has a first class Honours degree in Business and Marketing from the University of Stirling.