Autumn Budget 2024: Boosting the UK’s Clean Energy and Net Zero Goals

In the Autumn Budget 2024, the government has committed to substantial funding to accelerate the UK’s clean energy transition; from carbon capture and renewable infrastructure to electric vehicles (EVs) and green hydrogen. Here is a breakdown of the top announcements affecting the energy sector.

GB Energy and local investment

£125 million will be allocated to Great British Energy in 2025-26, headquartered in Aberdeen, while £100m has been earmarked for project development. The new body aims to drive clean energy innovation, leveraging Aberdeen’s expertise to transition workers from oil and gas to renewables and furthering Labour's agenda to shift to clean power.

Additionally,£163 million has been set aside for the Industrial Energy Transformation Fund (across 2025-26 and 2027-28) and £1 billion for local energy projects (over the next three years). This will facilitate the improvement of energy efficiency and reduction of emissions and operating costs in energy-intensive industries and public-sector facilities. The Budget’s focus on funding local energy schemes builds on the grants already on offer for public sector bodies seeking to implement heat decarbonisation and energy efficiency measures through the Public Sector Decarbonisation Scheme.

The implications of this landmark policy are likely to be far reaching. Our sector-focused energy team have plenty of expertise working with local authorities looking to realise their net zero policies (including through the roll-out of electric vehicles) and is ready to provide guidance as new legislative proposals emerge in the coming months.

Energy Profits Levy

The government confirmed the increase to the Energy Profits Levy on North Sea oil and gas producers from 35% to 38% and has extended the application of the levy by an additional year (to 31 March 2030). At the same time the government will be revoking the levy’s 29% investment allowance for qualifying expenditure that was incurred on or after 1 November 2024. It is intended that the changes to the Energy Profits Levy will result in additional funds raised to support the UK's decarbonisation efforts and encourage more businesses to look in the direction of clean energy investment opportunities.

Clean Energy Technologies

CCUS and Green Hydrogen: The government has confirmed that £3.9 billion will be provided in 2025-26 to fund Track-1 Carbon Capture, Usage and Storage projects, essential for reducing emissions from heavy industries such as cement and steel. Furthermore, the government has confirmed its support to the initial "electrolytic hydrogen production contracts" and it is expected that the Low Carbon Contracts Company will shortly be issuing the Low Carbon Hydrogen Agreement to the eleven hydrogen projects that were successful in securing funding during the first Hydrogen Allocation Round (HAR1).

Floating Offshore Wind: £134 million will go towards port infrastructure to support floating offshore wind (FLOW) which is fundamental for harnessing wind resources in deeper waters and increasing renewable energy capacity. As members of the Celtic Sea Cluster, we recognise the significant opportunity that FLOW offers—not only to the UK economy and energy security but also as a chance for the UK to demonstrate leadership in innovative energy solutions.

Nuclear Investment: A £2.7 billion boost for Sizewell C and the ongoing Small Modular Reactor competition emphasise nuclear energy’s role in a low-carbon energy mix, supporting consistent, low-emission power generation.

Electric vehicles

Over £200 million is being assigned to increase access to EV charging points, with an additional £120 million for grants supporting electric vans and accessible EVs. The extension of these tax incentives and allowances for EVs aims to make electric transport more accessible and affordable.

Heat decarbonisation

The Budget includes a commitment of £3.4 billion over the next three years for heat decarbonisation and household energy efficiency (£1 billion of which is dedicated to the coming year). This aligns with previous government plans to ensure that the increased demand for the Boiler Upgrade Scheme will continue to receive funding.

Impact of the Autumn Budget

The Autumn Budget’s diverse plans for investment highlight the UK government's ambitious vision for achieving Net Zero, and they’re certainly encouraging significant steps forward. The government anticipates that these measures will drive significant decarbonisation across the UK’s economy, bolstering the UK's leadership in the global energy transition, while targeting net zero by 2050.

Whilst the announcements have been broadly welcomed by industry, concerns have been expressed around the magnitude of private investment required for projects to materialise, particularly where nascent technologies, such as green hydrogen, CCUS and SMRs are concerned.

Developers who have been able to secure financing for green hydrogen projects via HAR1 point to the significant costs of securing the necessary power, the uncertainty around requisite volumes (which makes it difficult to finalise any power purchase agreement) and the technology of the electrolysers, which is still under development. The FLOW sector has, for quite some time, called for programmes to upskill workers in the sector, which will not be resolved without additional funding. It is possible to envisage a scenario where the additional funds from the increase in the Energy Profits Levy could be allocated towards upskilling programmes.

On heat decarbonisation the government seems to be focussing on upgrading existing boilers and has abandoned the village pilot studies on the use of hydrogen as a household fuel. Any decision on this matter is due to be made in 2026. As regards heat networks, a joint consultation of DESNZ and Ofgem on new regulations intended to protect consumers that connect to such networks, closed on 27 October 2023, but a response is still awaited, and the direction of travel remains unclear.

Finally, it's important not to forget the ongoing Grid Connections' Reform and the potential impact that this will have on any new (and in some cases) existing developments. You can read more on this in our Grid Connections reform article.

Our Clean Energy team has significant experience across the whole spectrum of technologies covered by the Autumn 2024 budget. If you are considering how the budget announcements are likely to affect your project, please do get in touch with one of our experts.