The green business agenda appeared to suffer new setbacks in the 2015 Autumn Spending Review, with cuts continuing to be made overall despite an increase in funding for certain schemes.
In positive news, the Autumn Statement provided a renewed level of certainty for some green and low carbon industries about the Government’s direction of travel over the course of this Parliament. Investment in energy innovation is set to double, while new funding plans were set out for renewable heat and domestic energy efficiency schemes.
There were also signs that cities may be given more control over energy and green policy as part of ongoing devolution agreements.
However, many of the new funding plans for the next five years represent a fall in overall government spending, with energy efficiency and the emerging market for carbon capture and storage (CCS) technology appearing to be the biggest losers.
In addition, both government departments concerned with the environment - the Department of Energy and Climate Change (DECC) and the Department for Environment, Food and Rural Affairs (Defra) - suffered new spending cuts.
The Autumn Statement announced that government funding for energy research will double to £500 million over the course of this Parliament, with a particular emphasis on nuclear and support for “promising new renewable energy technologies and smart grids”.
Energy and climate change secretary, Amber Rudd, said: “As we transition to a low carbon economy as cost effectively as possible, finding new sources of energy that are cheap, reliable and clean is essential, which is why we are boosting our spending on innovation and backing the industries of the future.”
However, in a surprising move, the Government scrapped its £1 billion budget for supporting the development of emerging carbon capture and storage (CCS) technologies, which had been expected to play a significant role in helping to reduce emissions from fossil fuel energy generation in future.
Several long-awaited announcements were made in terms of investment in energy efficiency, with the Government announcing £295 million over five years to improve energy efficiency in public sector buildings and £300 million to develop up to 200 district heat networks across the country.
The Government also announced that the Energy Company Obligation (ECO) domestic energy efficiency scheme, which places an obligation on major energy suppliers to fund energy efficiency improvements for homes, will be replaced be a new “cheaper” scheme in 2017.
The new scheme will cost £640 million a year for five years and will help to upgrade the energy efficiency of over 200,000 homes each year, the Government said.
However, many industry commentators argued that this represents a significant cut in the energy efficiency investments currently being made by the outgoing ECO scheme.
No announcements were made regarding support for non-domestic energy efficiency.
The Renewable Heat Incentive (RHI), which helps to subsidise the installation of renewable heat technologies in homes and businesses such as biomass boilers, heat pumps and energy-from-waste systems, will see funding increased to £1.15 billion a year by 2020/21.
This is expected to deliver enough investment to heat the equivalent of 500,000 homes by the end of the Parliament, despite the increase in funding actually representing a £690 million reduction on previous forecasts. There will also be an annual spending cap on the scheme, meaning that it could be closed to new applicants each year if the budget is reached early.
No decision was announced on the Government’s controversial plans to cut renewable energy subsidies through the Renewables Obligation (RO) and Feed-in Tariff (FIT) schemes, although it stated that if its proposals were implemented it would “save the average household around £6 and the average small business user £500 on their energy bills by 2020/21.” A final decision is expected shortly.
The Autumn Statement did, however, confirm that some energy-intensive industries will be granted from an exemption from paying for renewable energy subsidies on their energy bills in response to the recent turmoil in the steel industry.
No announcement was made on funding to support renewable energy beyond 2020.
Several announcements were made on further devolution to UK cities, including a new agreement with Greater Manchester to “support the low carbon transition” by considering how the design and delivery of national policies and programmes can be better aligned and integrated to support Greater Manchester’s priorities.
This will include discussions between DECC and Greater Manchester’s Low Carbon Hub on areas such as energy efficiency, community energy and business energy tax reform.
Posted under General Interest and Environmental Regulations and Legislation on 1 December 2015