Even before the dramatic escalation of the coronavirus crisis, the omens for the energy and climate agenda were not good heading into last week’s Budget.
A few days before the Treasury’s annual setpiece event, it emerged that the National Infrastructure Strategy (NIS) would no longer be published this month as promised in December’s Queen’s Speech.
Government sources briefed that this was because more work was needed to ensure the infrastructure blueprint reflected the net-zero emissions 2050 target, which was unanimously adopted by Parliament last summer.
Of course, it could be politely noted, the net-zero target shouldn’t really have come as that much of a surprise to the government that had introduced it.
For some, last week’s Budget lived up to these low expectations. Solar Trade Association chief executive Chris Hewett, for example, describes it as “thin on measures” to tackle climate change.
Simon Markall, head of public affairs and engagement at Energy UK, on the other hand, believes the government should be cut some slack given the coronavirus crisis. “Because of corona, we gave them the benefit of the doubt,” he says.
But Richard Black, director of non-profit organisation the Energy and Climate Intelligence Unit (ECIU), admits to being underwhelmed by last week’s package. “It was a bit like opening a box with ‘cake’ written on it and finding a fairly small muffin inside,” he says.
But it was an “adequate” budget to kick off the year leading up to the COP26 climate change summit, which is still scheduled to take place in Glasgow this November, Black adds. “What they have done is all necessary, and there is nothing retrograde like slashing air passenger duty,” he points out.
Rob Jeffery, director of public affairs firm Field Consulting, believes the government’s critics are being “slightly too harsh”, adding: “This is one of the greenest, if not the greenest, Budgets to date. Across all areas there’s something.”
He notes that the Budget set out ways to decarbonise heating, industry and transport. And the measures came on top of the previous week’s surprise move by the government to allow onshore wind and solar back into the CfD (contract for difference) subsidy regime.
Carbon capture
The big winner from last week’s Budget was carbon capture and storage (CCS), which has been back in fashion in government circles since the clean growth strategy in 2017.
The Budget confirms the Conservative manifesto commitment to establish CCS clusters in “at least” two UK sites by 2030. Their introduction will be supported by a new CCS infrastructure fund, worth at least £800m – the budget will be finalised in the comprehensive spending review later this year.
A bigger surprise was the Budget announcement that the government wants to see the construction of at least one gas-fired CCS power station by 2030. While privately financed, this plant will be supported by bill-payer subsidies, such as CfDs, an arrangement the industry had been pushing for
And Jeffery is heartened that the government’s commitment to CCS has grown from the single cluster it wanted a couple of years ago to “at least” two today. “The implication is that £800m is a start,” he says. “They are moving in the right direction.”
Black says the timetable for delivering CCS is “exactly” in line with what the Committee on Climate Change (CCC) says it needs to be.
But he points out that even if a CfD-type deal can be agreed, there are practical difficulties, such as carrying out geological surveys to ensure it is safe to lay pipework and build storage facilities to keep carbon dioxide trapped safely underground.
Transport
The picture on transport is rather less favourable than on CCS.
The plug-in car grant has been extended for another year into 2022/23, providing £403m worth of subsidies next year for the purchases of new electric vehicles (EVs). In addition, £129.5m worth of plug-in grants will be made available for vans, taxis and motorcycles to 2022/23, while zero-emission cars have been exempted from vehicle excise duty’s expensive car supplement.
Both moves will help to sustain the shift to low-carbon motoring at a time when EVs remain substantially more expensive than their fossil fuel-powered counterparts.
The Budget confirmed the award of £500m, announced by transport secretary of state Grant Shapps in January, over the next five years to support the rollout of a fast-charging network. And the Office for Low Emission Vehicles will conduct a “comprehensive” review of EV charging infrastructure, covering the strategic road network and other key locations.
Jeffery says that while the moves on EVs are welcome, they have to be balanced with moves to maintain the freeze on fuel duty and to boost roadbuilding, both of which will do little to stem the increase in emissions from transport, now the biggest contributor to UK greenhouse gas production.
Black argues that this funding will be less important than decisions taken by the government on whether to bring forward the phasing out of internal combustion engine vehicles.
Heat
As for heat, that other big carbon reduction conundrum facing the UK, the Budget shows little sign that the government is really getting to grips with the issue. Black describes the issue as the “biggest hole” in the whole Budget.
Last week’s announcement included an extension until 31 March 2022 of the domestic renewable heat incentive (RHI), which had been scheduled to be withdrawn at the end of the current financial year.
When the RHI extension ends, the government will consult on introducing a new low-carbon heat scheme from April 2022. This will consist of grants to support the installation of heat pumps and biomass boilers by households and small businesses, and will be backed by £100m of new Exchequer funding.
While low-carbon heating grants from 2022 are good news, the fund is limited, says Bean Beanland, president of the Ground Source Heat Pump Association. He points out that £100m will be sufficient to support the installation of only around 45,000 heat pumps given a subsidy of ten per cent for each device. “It’s nothing like enough,” he says, “and it’s just not going to get us where we need to be.”
Black says the CCC’s projections about the number of heat pumps that will be required if the UK is to meet its net-zero target make clear the need for much more financial support. “The CCC is talking about installing a million heat pumps per annum in five years: that’s a hell of a ramp up,” he says.
Hydrogen, the main alternative to the electrification of heat, should be focused on providing very high temperature heating for industrial premises rather than homes, according to Beanland. “We aren’t well suited to giving you 500 degrees, but we are well suited to giving you 21 degrees in a building,” he explains. “It should be about the course for the horse. We are going to need all of these technologies, including hydrogen.
Energy efficiency
Meanwhile, the Budget did not spare a penny for energy efficiency, despite the Tory manifesto pledge that such measures will attract £9.2bn worth of investment during the current Parliament.
Hewett describes the “lack of any meaningful policy on energy efficiency” as “particularly disappointing”.
Some experts, though, give the government the benefit of the doubt on this score, pointing to the heat roadmap that the government has said it will be publishing by the summer. The roadmap will create a further opportunity for the government to outline measures on heat and energy efficiency.
Jeffery adds that this is one of a number of announcements due in the coming months, including the NIS, the perennially delayed energy white paper and the transport decarbonisation plan.
But this also means that the white paper, already getting on for a year overdue as a result of Brexit and ministerial reshuffle-related delays, needs to contain a detailed framework when it is finally published. Markall says: “There is now more pressure on the government to deliver on the NIS and the energy white paper. The decisions we make in the coming years will decide what we do up to 2030 and beyond.”
An Energy Networks Association spokesperson says: “It’s great that the government has announced funding on this scale for EV charge points and CCS, but it needs to be backed up in the white paper by key decisions around infrastructure investment and sending the right signals to the regulator to ensure our members can deliver that.”
However while the climate emergency remains an existential threat, even the Extinction Rebellion movement has called off its protests for the time being
One energy source says that the decarbonisation challenge feels “quite trivial compared to what the world currently facing”.
Officials at the BEIS (department for business, energy and industrial strategy) are understandably focused on keeping the economy afloat as coronavirus threatens to force a mass of businesses to close their doors.
Utility Week sources, who have been in touch with officials at BEIS, are gloomy about the prospects of the white paper being published before the autumn.
Markall says: “We need infrastructure strategy and the energy white paper to come forward, but at the moment the priority turns to Covid-19.”