The Chancellor will next week promise to “reset” the UK’s decarbonisation and energy security plans through an “unprecedented” £20bn investment in carbon capture and clean energy infrastructure.
The Treasury confirmed this evening that next week’s Spring Budget will see the government respond to increasingly urgent calls from businesses and campaigners for a UK version of the US Inflation Reduction Act (IRA) and EU Net Zero Industry Act, both of which promise to pump billions of dollars of investment into clean tech industries.
In recent weeks, business groups have repeatedly warned that without an ambitious response from the UK, investors in crucial net zero technologies – such as electric vehicles (EVs), carbon capture and storage (CCUS) projects, hydrogen infrastructure, small modular reactors, and renewables – will be tempted to migrate to the US or EU so as to take advantage of the generous subsidies and supportive policies now on offer.
In response the Treasury this evening confirmed next Wednesday’s Spring Budget will feature a wide-ranging new clean energy package designed to mobilise £20bn of investment and deliver up to 50,000 jobs, while also bolstering the UK’s energy security.
The move will see Chancellor Jeremy Hunt commit to getting “spades in the ground” on crucial carbon capture and clean energy projects from next year.
“Without government support, the average household energy bill would have hit almost £4,300 this year, which is why we stepped in to save a typical household £1,300 on their energy bills this winter,” Hunt said in a statement. “We don’t want to see high bills like this again, it’s time for a clean energy reset. That is why we are fully committing to nuclear power in the UK, backing a new generation of small modular reactors, and investing tens of billions in clean energy through carbon capture. This plan will help drive energy bills down for households across the country and improve our energy security whilst delivering on one of our five promises to grow the economy.”
The new plan is expected to centre on a commitment to invest £20bn over the next 20 years to drive forward carbon capture projects that aim to store 20 to 30 million tonnes of CO2 a year by 2030, equal to the emissions from 10 to 15 million cars.
It will also feature plans to boost nuclear power generation through Great British Nuclear, the new body tasked with overseeing the development of a fleet of new atomic energy plants in the UK. Hunt is expected to launch a competition to deliver the UK’s first Small Modular Nuclear Reactors and confirm that nuclear projects will be formally classified as ‘green’ investments.
Energy Security and Net Zero Secretary, Grant Shapps, said the government was committed to building on the UK’s position as a world leader in the net zero transition.
“Putin’s illegal invasion of Ukraine has demonstrated to the world the vital importance of increasing our energy security and independence – powering more of Britain from Britain and shielding ourselves from the volatile fossil fuels market,” he said. “Already a global leader in offshore wind power, we now want to do the same for the UK’s nuclear and carbon capture industries, which in turn will help cut the wholesale electricity prices to amongst the lowest in Europe.
“Today’s funding will play an integral role in delivering that, helping us further towards our net zero targets and creating green jobs across the country.”
Precise details of how the new funding will be awarded are expected to be announced in Wednesday’s Spring Budget.
The government has previously committed to providing £1bn of funding to deliver four CCS industrial hubs by 2030 and approve a nuclear project a year through to the end of the decade. But developers have become increasingly frustrated in recent years at the government’s failure to finalise the policy framework and funding mechanisms that would allow such projects to proceed.
This evening’s announcement comes just a day after the Climate Change Committee (CCC) published a major new report warning that urgent action was needed to ensure the UK meets its target of building a decarbonised grid by 2035.
The CCC said it was possible to deliver a decarbonised grid by 2035 that would be dominated by renewable power, but would also be reliant on new nuclear and CCS plants, as well as new hydrogen power plants and flexible grid technologies.
The Treasury’s promised “reset” is likely to be warmly welcomed by the energy industry, which will now be hoping that Wednesday’s budget also delivers promised reforms to ease planning barriers for new renewables projects and increased support for clean tech supply chains.
The announcement follows hot on the heels of a new cross-Channel renewables and energy security partnership between the UK and France announced earlier today by Shapps and his French government counterpart, Energy Minister Agnes Pannier Runacher.
The new ‘Blueprint for UK-France Energy Cooperation’ commits the two countries to work with other G7 leaders to reduce reliance on Russian energy exports and explore the potential to boost electricity interconnection between the UK and France by up to two-thirds.
The two countries also are also exploring the potential to work together on the development of CCS projects, according to the UK government, which noted that the North Sea holds the potential to store 78 billion tonnes of CO2 on the continental shelf.
Announcing the collaboration today, Shapps emphasised that “successful economies need plentiful and reliable energy”.
“Putin’s barbaric invasion of Ukraine has demonstrated that energy security can only be achieved by working with our international friends,” added Shapps. “We are already partnering with France through these energy interconnectors, but we share the ambition to go much further. Today’s agreement could lead to two thirds boost in our interconnected power bringing more energy security and independence to the United Kingdom and France.”