The budget has some significant announcements on net zero in the run up to COP 26 in Glasgow – alongside the focus on Covid-19. There have been some headlines on taxing pollution such as a Plastic Packaging Tax, however these measures are relatively small with big decisions on sticking with or replacing the EU Emissions Trading Scheme still to be made. Most of the focus is actually on new spending, particularly on low carbon heating and electric vehicle charge points.

More fundamental change could come from the Treasury’s ‘net zero’ review due to report later this year. Regen’s Decarbonisation of Heat paper, launched yesterday proposed replacing the environmental levies that are charged on the domestic electricity bill to a carbon levy levied across electricity, gas and other fuels. We understand changes in this direction are under consideration. The long promised National Infrastructure Strategy is also now due “later in the Spring”.

Some of the key budget points are outlined below. As usual, the details on many of these points will follow as departments take forward the commitments.

Extend RHI by a year and introduce new grant:

The RHI has been extended for a year: “The government will extend the domestic RHI in Great Britain until 31 March 2022. It will also introduce a new allocation of flexible tariff guarantees to the non-domestic RHI in Great Britain in March 2021, helping to provide investment certainty for the larger and more cost-effective renewable heat projects.”

According to BEIS this will fund a third allocation of tariff guarantees under the non-domestic RHI. These will be available for all technologies that have been eligible for the previous two allocations.

The government then intends to replace this with a Low Carbon Heat Support Scheme. “The government will consult on introducing a new grant scheme from April 2022 to help households and small businesses invest in heat pumps and biomass boilers, backed by £100 million of new Exchequer funding.” According to BEIS this funding covers 22/23 and 23/24.

We are expecting a consultation on this within weeks.

Heat networks

The government is continuing to put significant funding into support heat networks “Recognising the energy efficiency benefits of heat networks, the Budget confirms funding for the Heat Networks Investment Project for a further year to 2022 and provides £270 million of new funding to enable new and existing heat networks to adopt low carbon heat sources.”

We understand there will be a consultation on a “Green Heat Network Fund” later in the year.

Double size of energy innovation programme

The government will at least double the size of the Energy Innovation Programme, with exact budgets to be decided at the Comprehensive Spending Review.

For context the programme currently has a budget of £505 million from 2015-2021 and consists of six themes:

  • £70 million in smart systems
  • £90 million in the built environment (energy efficiency and heating)
  • £100 million in industrial decarbonisation and carbon capture, use, and storage (CCUS)
  • £180 million in nuclear innovation
  • £15 million in renewables innovation
  • £50 million in support for energy entrepreneurs and green financing

Green Gas Levy

The government will consult on introducing levy-funded support for biomethane production to increase the proportion of green gas in the grid.

It looks like the funding for biomethane comes from an increase in the Climate Change Levy for gas. The levy is paid by non-domestic energy users on their energy bills.

Regen has been pointing out that more biomethane in the gas network will require investment in enabling the network to accept biomethane – something Ofgem is not currently allowing under the RIIO-2 price control mechanism that runs from 2021 to 2026. Some joined up government thinking will be required here.

Carbon pricing

There is a bit more detail on plans to replace or continue with the EU Emissions Trading Scheme: “The UK will continue to apply an ambitious carbon price from 1 January 2021 to support progress towards reaching net zero. The government will legislate at Finance Bill 2020 to prepare for a UK Emissions Trading System (ETS), which could be linked to the EU ETS. The government will also legislate for a carbon emissions tax as an alternative carbon pricing policy and consult on the design of a tax in spring 2020.”

EV charging

The lobby for funding ultra-rapid charging hubs has been successful: “The government is therefore providing £500 million over the next five years to support the rollout of a fast-charging network for electric vehicles, ensuring that drivers will never be further than 30 miles from a rapid charging station. This will include a Rapid Charging Fund to help businesses with the cost of connecting fast charge points to the electricity grid. To target spending from this fund effectively, the Office for Low Emission Vehicles will complete a comprehensive electric vehicle charging infrastructure review.”

Regen’s EV and the Electricity System Forum event on 22 April is focused on ultra-rapid charging and includes a presentation from Aaron Berry from OLEV (given current circumstances we will be keeping under review whether to shift to a webinar format).


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