Autumn Statement 2023: a renewed focus on renewable energy in the UK

An encouraging statement, with a significant focus on the sector and some useful (if not sufficient) measures to boost renewable energy in the UK.

Head of Energy, Renewables and Natural Resources sector, Joe Coghlan, examines the contents of the Autumn Statement.

• Download our full summary (pdf)
• Download 2024/25 Tax Tables (pdf)

The most eye-catching announcements were the permanent extension of full expensing, expected to provide a £10bn annual corporation tax reduction across all sectors, and a £960m fund for a Green Industries Growth Accelerator.

Arguably more important, new plans were revealed to tackle the significant planning and grid connection issues for renewable energy.

Scepticism is always required until such plans become reality – all the commissions, committees and reports in the world won’t magic away the vested interests which have hitherto put a break on progress in the first place.

Still, choosing to raise these issues in the government’s second biggest ‘set piece’ announcement of the year shows some positive intent.

More notable than any individual announcement was the emphasis the Chancellor put on the sector and renewable energy in particular.

In his speech, Mr Hunt announced an advanced manufacturing plan for growth to include the automotive, aerospace, life sciences and green industries. Thus, it was one of only four sectors to receive a specific mention in the statement.

Anybody hoping for a UK version of the US Inflation Reduction Act, or the EU REPowerEU, will continue to be disappointed. The Autumn Statement reiterated the government’s approach, which is to focus on supply-side reform and provide relatively small amounts of funding to boost private sector investment.

Nonetheless, it’s clear that, to the extent that the government has an Industrial Strategy, clean energy will be at the heart of it.

Whatever your view on the overall strategy, the spotlight shone on the sector in yesterday's statement was welcome.

Turning to the specific measures announced:

Making full expensing permanent

The most significant measure announced for business. This has extended the Full Expensing regime announced in the Spring Budget to make it permanent.

This means that qualifying plant and machinery will continue to qualify for 100% or 50% allowances in the year of acquisition.

For a multimillion-pound energy generation scheme, or extractive project, this will clearly be a significant and welcome cashflow benefit. The government’s full report on the Autumn Statement said:

“[Full expensing] applies across the economy, including to the UK’s capital-intensive green industries such as solar and offshore wind, which will also benefit from a new investment exemption from the Electricity Generator Levy. Permanent full expensing also provides further support for companies that want to decarbonise by investing in solar panels and heat pumps, and for companies that want to invest in newer, greener plant and machinery.”

Planning reform and removing barriers to investment in renewable energy

A plan “to get Great Britain building and to deliver energy security and the net zero transition, the government will remove barriers to investment in critical infrastructure by reforming the UK’s inefficient planning system and speeding up electricity grid connection times.”

Specifically, this is referring to:

• A new policy paper to “get Britain Building Again” and a commitment to progress on the National Infrastructure Commission’s April recommendations on planning
• The Connections Action Plan published by the Department for Energy Security and NetZero and Ofgem
• The Government’s response to the Winser Report

Green Industries Growth Accelerator

The announcement of £960m funding over 5 years starting in 2025 to support investments in manufacturing capabilities for the clean energy sector, focusing on: Carbon Capture Utilisation and Storage (CCUS), hydrogen, offshore wind, electricity networks, and nuclear.

There are no concrete details on how this scheme will operate, but the wording suggests that funding will follow an application process and will need to be matched with private sector investment.

Energy Profits Levy

Confirmation that the levy will end no later than 31 March 2028. The final design of the Energy Security Investment Mechanism, which sets out the oil and gas prices at which EPL will apply, has been confirmed.

Electricity Generator Levy (EGL)

The announcement of a new investment exemption to for the EGL meaning that all new projects for which the substantive decision to proceed was made after 22 November 2023 will be exempt from the EGL.

Confirmation that the EGL will end as planned on 31 March 2028.

R&D tax credits

The merger of the SME and RDEC (large company) schemes has been confirmed. While less generous for SMEs, this remains an important source of funding for innovative energy and natural resource businesses.

Emissions Trading Scheme (ETS)

Confirmation that the number of permits available will reduce by 45% between 2023 and 2027 and that the scheme will extend to cover domestic maritime and energy from waste in 2026 and 2028 respectively.

Further consultation on measures to mitigate carbon leakage risk, including a carbon border adjustment mechanism. The results of which will be announced shortly.

Climate Change Agreement Scheme / Climate Change Levy

The main and reduced rates of the Climate Change Levy will be frozen in 2025/26. 

The main rate will be frozen at £0.00775/kWh for electricity and gas, £0.02175/kWh for liquid petroleum gas (LPG), and £0.06064/kWh for any other taxable commodity. Reduced rates will be frozen at 92% for electricity, 77% for LPG, and 89% for gas and any other taxable commodity.

An extension of the Climate Change Agreement Scheme, including a new six-year regime from 2025 to 2030. Participants meeting agreed energy efficiency or decarbonisation targets between those years will be entitled to a reduced rate of Climate Change Levy.

Aggregates Levy

Will increase in line with RPI from 1 April 2025 to £2.08 per tonne.

VAT

Expansion of Energy-Saving Materials VAT Relief to include additional technologies (such as water-source heat pumps) and bringing buildings solely used for a charitable purpose into the scope. Full details of these changes will be announced in due course.

Other points

• Plans to legislate for wider borrowing and investment powers for the Crown Estate to help unlock an additional 20 – 30 GW of new offshore wind seabed rights by 2030.
• Mention of the Government’s work with the Crown Estate to bring forward additional floating wind turbines in the Celtic Sea through the 2030s – which could see an additional 12GW of additional generation deployed.
• Mention of the Critical Minerals Strategy Refresh announced in March 2023

Further information

If you would like to discuss how these changes could impact your business, contact Joe Coghlan or your usual Bishop Fleming contact.