On Wednesday 22nd November 2023, the Chancellor Jeremy Hunt unveiled (over 100!) important changes to the UK Government’s tax and spending plans. Whilst his announcement of a 2% cut to the main rate of National Insurance for employees has taken much of the attention, he also revealed a number of changes which may affect the UK’s renewable energy industry.
Some of the measures announced include: reforms to the planning system to reduce the time taken for planning decisions and grid connections; increased investment in energy security and net zero; and confirmation that the popular ‘full expensing’ regime will be made permanent.
Figure 1: Jeremy Hunt Delivering Spring Budget 2023 [1]
‘Full Expensing’ and 50% First-Year Allowance
Full expensing was announced in the Spring Budget 2023, to replace the previous super deduction for business investment, which had been in place since 2021 [2]. At the time, it was planned for this scheme to run from April 2023 to March 2026 [3], but this has now been made permanent.
Full expensing allows for companies to deduct 100% of the cost of qualifying plant and machinery investment including construction and office equipment [4]. Also included in this scheme is a 50% first-year allowance for special rate assets, which include solar panels and other renewable energy investments which would normally only be written off at a rate of 6% per year.
When first introduced, ‘full expensing’ was widely welcomed within the renewable energy industry, but many industry groups called for this to be made permanent [5]. Now that the Treasury has confirmed that the scheme will be permanent, this should provide investors and businesses with the assurance to incentivise long-term investment.
The Government hopes that this will increase business investment by £3 billion per year across all sectors [6], a sizeable proportion of which they hope will be invested into renewable energy, to help the UK meet its net zero targets.
Planning Reforms
The first planning reform announced by the Chancellor was a commitment to accept the recommendations of the National Infrastructure Commission (NIC) [7], with an aim of reducing the average consenting time to two and a half years [8]. This will involve the Government publishing spatial data on NSIPs and altering the process for updating National Policy Statements, in line with a further policy paper on infrastructure delivery [9].
Alongside this, plans were also introduced for what the Government describes as ‘premium planning services’ with guaranteed quicker decision dates and refunds where these deadlines are missed. Exactly how this will be delivered is still unknown given the current stress upon the planning system, but the Autumn Statement also commits £5 million to ‘incentivise greater use of Local Development Orders in England’ [10]
A particular area which is causing great delays for renewable energy projects currently is the lack of available grid connections, and the Autumn Statement acknowledges this as an issue, with an aim to reduce connection delays to no more than six months, from the current five years [11]. There are also plans for the Government to halve the time it takes to build new grid infrastructure, with proposals to offer community benefits of up to £10,000 off energy bills [12].
Investment in Energy Security and Net Zero
The Government announced £6 billion of funding to support energy efficiency in the 2022 Autumn Statement [13], and this year allocated £185 million of this to the Industrial Energy Transformation Fund (IETF). The IETF is hoped to support ‘industrial sites [to] invest in more energy efficient and low-carbon technologies’ [14]. While this funding cannot be used for renewable energy installation, by reducing the energy requirement of these industrial processes, it may make powering these processes through on-site renewable energy more feasible in the future.
Another measure included in the Autumn Statement was a £960m Green Industries Growth Accelerator (GIGA) to support investment in clean energy manufacturing. The money will be focused on carbon capture, hydrogen, offshore wind, energy networks, and nuclear [15].
Industry Reaction
The Autumn Statement has broadly been welcomed by industry groups and commentators, with Dan McGrail of RenewableUK stating [16]:
“There’s a strong focus in Chancellor’s Autumn Statement on accelerating green industrial growth. His announcement on permanent full expensing will provide a much-needed degree of long-term certainty for investors in green technologies, helping to make the UK an attractive destination for investment in clean energy projects and manufacturing.”
He also welcomed the GIGA and reforms to the planning system, though some claim that the measures announced did not go far enough and that the UK will lag behind other major economies in terms of their green incentives [17].
References
[1] Simon Walker (March 2023) from WikiCommons. Accessed on: 23rd Nov 2023.
[2] Budget 2021, HM Treasury (March 2021), 2.111
[3] Spring Budget 2023, HM Treasury (March 2023), 3.71
[4] Autumn Statement 2023, HM Treasury (November 2023), 4.9
[5] Terry Murden, “Full Expensing Helps But ‘Needs To Be Permanent’”, Britain Remade (March 2023). Accessed on 23rd Nov 2023 at: https://www.britainremade.co.uk/full_expensing_helps_but_needs_to_be_permanent
[6] Autumn Statement 2023, 4.11
[7] Delivering net zero, climate resilience and growth: Improving nationally significant infrastructure planning, National Infrastructure Commission (April 2023)
[8] Autumn Statement 2023, 4.22
[9] Getting Great Britain building again: speeding up infrastructure delivery, DLUHC (November 2023)
[10] Autumn Statement 2023, 4.23
[11] Autumn Statement 2023, 4.25
[12] Autumn Statement 2023, 4.26
[13] Autumn Statement 2022, 5.6
[14] Autumn Statement 2023, 4.64
[15] ibid, 4.77
[16] Dan McGrail, “RenewableUK welcomes measures in Chancellor’s Autumn Statement to accelerate green growth”, RenewableUK (November 2023). Accessed on 23rd Nov 2023 at: https://www.renewableuk.com/news/658515/RenewableUK-welcomes-measures-in-Chancellors-Autumn-Statement-to-accelerate-green-growth-.htm
[17] Helena Horton, “Autumn statement leaves UK lagging on green investment”, The Guardian (November 2023). Accessed on 23rd Nov 2023 at: https://www.theguardian.com/uk-news/2023/nov/22/autumn-statement-green-investment-energy-climate-environment
