UK – Mini Budget 22: Chancellor unveils ‘growth plan’ to accelerate infrastructure development, hydrogen included.
Kwasi Kwarteng’s Mini Budget set out aims to streamline planning for roads, nuclear, renewables, hydrogen, CCUS and oil and gas, and confirms a modest boost for energy efficiency funding.
Kwasi Kwarteng has promised to turbocharge the development of a raft of infrastructure projects by streamlining the planning process for road, rail, nuclear, wind energy, hydrogen, CCS, and oil and gas projects, as he branded his hotly-anticipated Mini Budget this morning (23 September) as a plan for growth.
In a surprise move, the planning reforms included a commitment to lift the effective ban on new onshore wind projects in England by putting them on the same footing as other key infrastructure projects.
However, the boost for low-carbon infrastructure development came alongside similar moves designed to accelerate investment in high carbon projects that are set to face fierce opposition from green groups.
The chancellor said the government was “getting out of the way to get Britain building” through its new Growth Plan, which sets out a raft of major tax cuts alongside plans to ditch or curtail green planning rules and habitat regulations, and support homes and businesses facing soaring energy bills and inflationary pressures.
The plan includes a “non-exhaustive” list of more than 100 nationally significant infrastructure projects which the Treasury said would be “accelerated as fast as possible” through planning reforms and streamlining of the development consent process, with the aim of getting “the vast majority starting construction by the end of 2023”.
Alongside 86 road building and safety schemes, the list includes Hinkley Point C and Sizewell C nuclear power projects; seven offshore and floating wind schemes – including the most recent seabed licensing rounds – two government funding schemes for electric vehicle charge points; five hydrogen production and infrastructure schemes; as well as ten national rail and 15 local rail, bus and tram projects.
The plans promise to provide a boost to the government’s Net Zero Strategy, given planning constraints remain one of the biggest barriers to low carbon infrastructure development. But the list of priority projects also includes five oil and gas projects, including phase one of the controversial Cambo field in the North Sea, which campaigners fear could pose a threat to the UK’s long term emissions targets.
In a surprise move that is sure to be warmly welcomed by the renewables sector, Treasury documents released alongside Kwarteng’s speech signal the government’s intention to lift the long-held block on new onshore wind farms in England, with a pledge to “unlock the potential of onshore wind by bringing consenting in line with other infrastructure”.
Although Kwarteng made scant mention of the net-zero transition and clean energy development in his speech to parliament, the documents tout home growth low carbon energy sources such as nuclear, hydrogen, carbon capture utilisation and storage (CCUS) and renewable technologies – alongside increasing domestic gas supplies – as crucial to boosting domestic energy security and delivering on climate goals.
The Growth Plan stated:
By 2023 the government is set to increase renewables capacity by 15%, supporting the UK’s commitment to reach net-zero emissions by 2050.
The Plan also delivers a boost for energy efficiency – widely touted as a crucial means of cushioning the impact of soaring energy bills for businesses and households for the long-term – promising to place new obligations on energy suppliers to “help hundreds of thousands of their customers to take action to reduce their energy bills”, in a move it predicts could deliver an average saving of around £200 a year per household.
“This help will be worth £1bn over the next three years, starting from April 2023,” it stated. “Support will be targeted at those most vulnerable, but will also be available for the least efficient homes in lower council tax bands.”
In addition, the government said it would “imminently” open applications to up to £2.1bn over the next two years to support public sector buildings invest in energy efficiency and renewable heating.
The increase in funding for energy efficiency schemes is likely to be welcomed, but the promised funding falls well short of the £5bn package the industry backed Energy Efficiency Infrastructure Group had proposed.
Separately, the Department for Business, Energy and Industrial Strategy announced a £49.4m funding boost to support heavy industrial firms – including steel, ceramics, pharmaceuticals and food production – switch away from expensive fossil fuels towards cheaper, greener fuels and energy sources.
The government said the move would support efforts to decarbonise industry in line with the UK’s 2050 net zero target.
Kwarteng also provided further details on the government’s energy security strategy, promising “significant interventions” in the energy market to reduce costs and improve long-term supply resilience.
New measures include plans for a £40bn Energy Markets Financing Scheme, delivered alongside the Bank of England, in order to provide a backstop source of additional liquidity for energy firms that are “in otherwise sound financial health” to help them cope with extraordinary fluctuations in wholesale energy prices, the government said.
It will be limited to firms “systematically important” to the UK economy, with liquidity provided through a 100% guarantee delivered through commercial banks, with applications set to open on 17 October.
The Treasury also confirmed a flurry of measures already trailed in recent days and weeks ahead of today’s Growth Plan, including moves to lift the ban on fracking in England, hand out further licences for North Sea oil and gas exploration, and curtail green planning regulations such as habitat protection rules in almost 40 new low tax and low regulation ‘Investment Zones’ across the country in a bid to incentivise investment from businesses and developers.
The plans come just a day after the government confirmed it is to relax the proposed climate compatibility test on new North Sea oil and gas projects, angering environmental campaigners.
The government confirmed it was scrapping three out of six proposed tests that new fossil fuel projects would have to comply with, including requirements to consider the impact of so-called Scope 3 emissions that result from fossil fuels being burned, whether new projects would add to global oil and gas production that endangers the Paris Agreement, and whether companies are also investing in clean energy.
Greenpeace’s Philip Evans said the changes meant the climate compatibility checkpoint was now “a sham”. “It allows the government to rubber-stamp oil and gas licences as being climate-friendly,” he added.
The planning reforms come on top of previously announced measures aimed at cushioning the impact of soaring energy bills this autumn and beyond, including a freeze on average household bills of £2,500 a year from next month and an “equivalent” plan to curb bills for businesses for at least six months.
The government also confirmed plans to negotiate new 15-year contracts for energy generators such as nuclear and renewables projects in a bid to drive down energy costs – a proposal that has divided energy industry experts with some predicting it could help curb bills and others warning it could lock in higher than necessary prices for the long term.
Kwarteng told Parliament today he expected the costs of the full energy support package to be in the region of £60bn over the six months starting from October.
Kwarteng said:
The estimated costs of our energy plans are particularly uncertain given volatile energy prices, but based on recent prices, the total cost of the energy package for the six months from October is expected to be around £60bn pounds.
“We expect the cost to come down as we negotiate new, long-term energy contracts with suppliers.”
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Mini Budget 22: Chancellor unveils ‘growth plan’ to accelerate infrastructure development, September 22, 2022
