At-a-glance: Low carbon details of today's UK Budget

by Search Gate staff. Published Wed 24 Mar 2010 18:47
Chancellor Alistair Darling delivers his green Budget

Investment in low carbon technologies was at the heart of the Budget delivered by the Chancellor today.

Major low carbon components of today’s Budget are:

* Green Investment Bank
The new Green Investment Bank for Low Carbon Development announced by the Chancellor today will be a major step in overcoming the finance challenge confronting infrastructure projects in the UK. The Government says this will be particularly important for the energy sector given the scale of the investment needed to bring forward low carbon electricity, and will have an early focus on offshore wind.
The Government will fund its investment of up to £1bn in the bank using receipts from the sale of mature infrastructure-related assets and will seek to match this with at least £1bn of private sector investment.

* Offshore wind infrastructure competition
The Chancellor has today announced a competition for up to £60m of funds to develop sites close to ports that will support manufacturing for the offshore wind industry.
Site developers will be able to bid for access to the fund. The Government says it will be expecting all bids to include contributions from local supply chain partners.
The competition will help the UK secure major operations in offshore wind manufacture and assembly, which will directly create hundreds of skilled jobs with thousands more in the supply chain.
Supporting the development of the offshore wind sector is crucial to enable the UK to realise its renewable energy ambitions. Britain is, and will remain for the foreseeable future, the largest single market for offshore wind in the world.

* Energy market reform
The initial findings of the Energy Market Assessment were published alongside the Budget, narrowing down the options for market reform to incentivise the necessary investment over the next few decades and to “ensure the consumer gets the best deal possible in the long term”.

The initial findings are:

• The energy market has delivered for the UK economy and, with the measures set out in the Low Carbon Transition Plan, will continue to deliver to 2020.

• But for the long term the status quo is not an option. The challenges beyond 2020 are significant and will increasingly place pressure on the market in its current form. The UK’s binding 80% greenhouse gas reduction target by 2050 will only be achieved by huge increases in low-carbon electricity generation, requiring unprecedented levels of investment, including the upfront costs of many low carbon technologies.

• Providing greater certainty on the current carbon price alone will not be enough to drive the long-term change needed.

• The Government is ruling out a single buyer agency, saying this would not drive cost efficiency or bring the same benefits as a market-based approach.

• The issue of liquidity in the wholesale electricity market needs addressing. New players are needed to ensure a dynamic market that delivers the best possible deal for the consumer.

The Government says it will work closely with the industry, regulator and other interested parties to assess the remaining options against a criteria of cost-effectiveness, affordability and investor certainty.

Proposals will be brought forward for consultation this autumn, with a White Paper following in Spring 2017.

* Pay As You Save
Following the publication of the Government’s Household Energy Management strategy in March, the Budget has today announced that the Government and the financial services industry will undertake detailed work through a joint forum to develop PAYS arrangements. This will enable millions of households to finance the high upfront costs of installations from the savings they make on their energy bills.

* Consultation on Biomass
The Government today announced its intention to consult shortly on proposals to change the way in which electricity from biomass is supported to improve investor certainty and ensure sustainability. This follows a review of how biomass is supported under the existing £1bn Renewables Obligation (RO).

Proposals include:

• Providing a set level of support for dedicated biomass (such as woodchip, energy crops) for their lifetime under the Renewables Obligation. This would split non fuel (e.g upfront capital) costs for new plants from fuel costs, meaning a consistent level of income for capital outlay, with a fuel element subject to regular review.

• Grandfathering ROCs for anaerobic digesters and energy from waste with CHP facilities at current levels from point of accreditation.

• Excluding bioliquids from receiving grandfathered support under the RO.

• Consulting in the summer on the introduction of sustainability criteria for biomass (such as wood and energy crops used for heat and electricity) and considering whether biomass generation must meet these criteria as a condition of qualifying for financial support.

Support for generators in all technologies other than biomass is currently grandfathered, meaning that the level of ROCs they receive is set at the point of accreditation for 20 years, irrespective of future changes to support levels.

* Nitrous oxide gases
The Budget today announced that Government intends to opt nitrous oxide gases from nitric acid production into the EU ETS from 2017. This is expected to lead to additional abatement of around 2 MtCO2 equivalent between 2017 and 2015.

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