The Chancellor’s ‘mini-budget’ came hot on the heels of the Prime Minister’s Energy Plan, announced on 8 September and the Business Support Package launched on 21 September. Kwasi Kwartang unveiled a new Growth Plan on 23 September with the stated aim of tackling energy costs to bring down inflation. However, beyond already-announced policies like the Energy Price Guarantee for households and Energy Bill Relief Scheme for businesses, the plan contains few energy-related announcements and is instead dominated by sweeping tax cuts.
Under the new support scheme announced by PM Liz Truss in September, households will benefit from an Energy Price Guarantee from 1 October, which limits the unit cost of electricity and gas. The typical household will now pay around £2,500 a year on average, instead of £3,549 under the previously announced energy price cap.
Businesses will benefit from equivalent support through an Energy Bill Relief Scheme, which will run for six months from 1 October. Under the scheme, the government will discount energy bills on fixed contracts agreed on or after 1 April 2022, as well as to deemed, variable and flexible tariffs.
The level of discount will vary depending on the type and date of a business’ energy contract. Following the six-month scheme, the government will narrow its support to those deemed “most vulnerable”, with a review in three months’ time to identify which businesses and sectors fit this category.
According to the Energy and Climate Intelligence Unit (ECIU), the decision to cut government support for home insulation in 2013 means 10 million UK homes may have missed out on upgrades that could have left gas demand from housing almost 10 per cent lower than it is today.
Germany is widely considered one of the most successful countries in this area. Leaders recently unveiled plans to spend a third of a new €177 billion climate fund on building retrofit. The country currently provides a combination of grants that cover up to 50 per cent of improvement costs, with a long-running low-interest loan scheme to cover remaining costs, as well as grants for advice from energy efficiency experts.
The UK could also learn from successful policies implemented by other countries such as France, Italy and Finland, according to a recent report by the Institute for Government.
The Treasury has partially granted the wish of the energy industry and several green groups by announcing a new obligation on energy suppliers to install energy efficiency measures in the least efficient homes. The existing Energy Company Obligation (ECO) is now in its fourth phase, which runs from 2022 to 2026 and is worth £4 billion.
The government has confirmed that the new obligation will be worth more than £1 billion over the next three years, starting from April 2023. Green groups have been calling on the government to introduce an ‘ECO+’ scheme worth £5 billion.
The Growth Plan also confirms the imminent opening of applications for an already announced £2.1 billion to support local authorities, housing associations, schools and hospitals to invest in energy efficiency and renewable heating over the next two years.
The biggest surprise from the Chancellor’s mini-budget is an end to the effective ban on the UK’s cheapest form of renewable power, onshore wind, which has been in place for several years due to opposition from Conservative MPs. The Growth Plan states: “The government will unlock the potential of onshore wind by bringing consenting in line with other infrastructure.”
The move should accelerate the time it takes to build and connect new wind farms from years to months. Jess Ralston, senior analyst at the Energy and Climate Intelligence Unit (ECIU) think tank, said: “The ban on onshore wind – which around eight in 10 people support – has been a major anomaly in British energy policy given it's both cheap and popular with the public. So a decision to lift the ban suggests the new government has listened to the experts and understands building more British renewables reduces our reliance on costly gas and so brings down bills.”
According to the Growth Plan, renewable energy capacity in the UK is expected to increase by 15 per cent by 2023.
Other announcements from the mini-budget include:
Aside from the Chancellor’s mini-budget, a host of further policy proposals to incentivise businesses to invest in energy saving measures have been laid on the table by the UK’s biggest business groups.
The Institute of Directors (IoD) proposes the introduction of a lower corporation tax rate for companies that have achieved net zero as a way of incentivising investments in energy efficiency. The IoD has also backed a proposal from the Federation of Small Businesses (FSB) to introduce £5,000 ‘Help to Green’ vouchers, which would work in a similar way to the existing Help to Grow: Digital scheme by helping smaller businesses to invest in green measures or fund an energy efficient audit.
Manufacturing trade association Make UK has called on the government to introduce a dedicated long-term capital allowance regime to spur investment in green technologies by extending business rates exemption for on-site renewables and battery storage, and relief for insulation and other building improvements.
Meanwhile, the CBI is advocating an expansion of the government’s Industrial Energy Transformation Fund, which currently supports the deployment of energy saving technologies in a small number of the UK’s highest energy-using businesses.
Louise Hutchins, head of policy and public affairs at the UK Green Building Council, commented: “It’s now urgent that the government comes forward with a strategy to cut the vast costly energy waste from…poorly insulated buildings and drive a shift from gas and oil heating to more efficient, low carbon options.
“Measures such as VAT and business rates cuts for businesses investing in decarbonising their buildings and requiring companies to measure and publish their energy performance will all be needed if we are to get off the hook of high and volatile gas bills year-on-year.”
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Amy is a chartered environmentalist with two decades experience working with the businesses at the heart of the net zero transition.
With an MSc in Environmental Monitoring, Modelling and she has a deep understanding of the technologies that make up the industry, the legislation that affects it and the businesses and people at its core.
Amy has a unique understanding of the supply chain and advocates for the sector with buyers, local decision makers and national policy makers. Amy and her team have established Green Economy to improve the competitiveness of the supply chain, to overcome the market failures that prevent uptake of low carbon technology and to promote the businesses playing a key role in delivering the UK’s net zero ambition.
