UK budget relating to solar and storage

This year, UK Chancellor Rachel Reeves made several spending commitments that have consequences for the country's low-carbon economy.

Addressing the nation at her government's budget speech, Reeves stated her desire to rebuild the country. The spending commitments included in the budget have implications for the deployment of storage and solar technologies.

The budget increases the budget of Net Zero and the Department of Energy Security. From 2023 to 2024, the former's budget will increase from approximately ￡6.4 billion to approximately ￡14.1 billion.

In her speech, Reeves did not specifically mention solar, but she did state that the government would allocate 125 million pounds in 2025 to establish the Great British Energy Investment Vehicle. The company, which will be based in Scotland, will be supported by an investment budget of over ￡8 billion.

The objective of the state enterprise is to invest in renewable energy projects across the UK. It seeks to attract private capital in the process. The government also plans to establish a new National Wealth Fund that aims to raise over 70 billion pounds in investments in the clean energy industry.

Planning

The budget allocated more cash for the planning department. Slow planning approvals can hinder the country's efforts to deploy storage and solar technologies, as well as other key projects.

In her budget speech, Reeves committed to investing in the planning department with an additional budget of 46 million pounds to hire 300 new officers. Her government also plans to allocate an additional 5 million pounds to improve the planning regime for major infrastructure projects. This process involves securing planning approval for solar projects with 50 MW capacity or more.

In October 2024, the Scottish and UK governments held a consultation to develop a streamlined planning system for energy projects that are located in Edinburgh.

Heat pump funds

Reeves also allocated more funds to support a grant program that has been instrumental in promoting the adoption of heat pump technology in the UK. The program, known as the Boiler Upgrade Scheme, was first introduced in Wales and England in April 2022. It provides grants to help individuals and businesses install energy-efficient heating systems.

Over 50,000 applications were submitted for the program from May 2022 to September 2024, with almost all of them coming from air-source heat pumps. The average cost of installing an air-source system in Wales and England is around ￡13,000.

The additional funds for the program are part of the government's Warm Homes Plan, which also includes support for fuel poverty initiatives. According to budget documents, the government will allocate funds to help boost the heat pump manufacturing industry in the UK.

In Northern Ireland, the government's boiler replacement program ended in 2023. Through the Home Energy Scotland program, loans and grants can be obtained in Scotland.

Green hydrogen

In the UK, the chancellor provided some certainty by allocating funds to support the development of green hydrogen projects. The first allocation round for green hydrogen started in July 2022. It awarded contracts for 125 MW of capacity. The contracts were awarded at an average price of around ￡241/MWh.

According to Reeves, the projects that were awarded during the first round will be some of the first commercial facilities to be established globally. The cash for the contracts came from the government's fund for green hydrogen and other carbon capture and storage projects.

Cost of carbon

Aside from announcing major spending initiatives, the Labour Party's first budget for 14 years also included several tax-raising measures. One of these is the energy profits levy, which was introduced in May 2022. This new tax was primarily applicable to the North Sea's oil and gas industry.

In addition to increasing the tax rate, Reeves also removed a 29% investment limit and extended the lifespan of the energy profits levy until 2030. This means that the North Sea's headline tax rate will now be at 78%.

In addition, Reeves noted that the UK will introduce a carbon adjustment mechanism, which will be implemented in January 2027. This will be a similar mechanism to that used in the European Union.

Electric vehicles

The UK government will allocate over ￡200 million to the development of electric vehicle charging infrastructure from 2025 to 2026. Reeves also committed an additional ￡120 million to support the manufacture of electric vans that are wheelchair-accessible.

Various tax incentives for the purchase of electric cars were also maintained. These include the reduction in vehicle excise duties and the reduction in company car tax regimes. A freeze was also maintained on the planned increases in fuel duty.

Reaction

Trevor Hutchings, the head of the Renewable Energy Association, commended the UK government's budget. He noted that it showed its commitment to the development of clean technology.

According to Hutchings, the changes in the fiscal rules that will allow the government to attract investments signals a bold move toward a more sustainable growth strategy. He also noted that the measures related to the carbon border adjustment and the Warm Homes Plan are positive steps.

However, he noted that the government missed opportunities to deliver ambitious goals. For instance, it should have increased the fuel duty rate and the carbon floor price.

Hydrogen UK's policy head, Bret Ryan, was pleased with the government's confirmation of the continued support for the commercial development of hydrogen.