The Energy Transition | Energy announcements in the Budget

This week, we look at some of the energy announcements from the Spring Budget, the first recyclable wind turbine blades to be installed in the UK, and more. 

The Spring Budget: Energy announcements 

The Chancellor's Spring Budget contained the following important energy announcements: 

Energy Price Guarantee to remain at £2,500 for an additional three months 

The government announced a three month extension to the Energy Price Guarantee (EPG). The domestic energy bills support measure provides a cap on typical annual bills of £2,500, which is believed to save the average household £160 a year. The EPG was originally introduced in October 2022 in response to a potential 80% increase in energy prices for UK households following supply pressures due to the war in Ukraine.

In related news, Ofgem has confirmed it is investigating potential breaches by some non-domestic suppliers of the Energy Bill Relief Scheme (EBRS). The EBRS is a government scheme designed to shield non-domestic customers, such as businesses and public sector organisations, from energy price rises by providing a discount on the wholesale price of gas and electricity. Concerns have been raised around some of the pricing and charging behaviours of certain suppliers, including steep increases in the value of security deposits requested in some instances. 

The EBRS will officially end on 31 March 2023, with its successor, the Energy Bills Discount Scheme, coming into effect on 1 April 2023. 

Government confirms £20 billion carbon capture investment

The government has announced an unprecedented £20 billion investment in carbon capture, usage and storage (CCUS) projects over the next two decades. The funding commitment aims to put the UK at the forefront of global efforts to develop CCUS technologies that can help to decarbonise heavy industries such as steel, cement and chemicals. By supporting the development of CCUS projects, the government also intends to create new jobs, drive economic growth and help to achieve the target of reaching net zero by 2050.

The investment marks an increase to the previous commitment of a £1 billion fund for four CCUS industrial hubs, which had been the subject of criticism from developers due to the lack of policy and detail to allow these projects to be realised.

For further information on CCUS, see the latest episode of our Energy Innovation podcast, "The future of carbon capture, utilisation and storage". In this episode, Osborne Clarke's Corporate Partner, Matt Levy, interviews Matt Redrup of the North Sea Transition Authority on  CCUS in the UK, what the industry isn't talking about, and the wider offshore environment. 

Government launches Great British Nuclear

The government has announced the launch of the Great British Nuclear (GBN) programme. The aim will be to address perceived constraints in the nuclear market and to support investment in the industry, to enable the government's target 24GW of installed nuclear capacity by 2050 to be realised. 

The initial focus will be investment in Small Modular Reactors (SMR). The government plans to hold an international competition and to select the leading SMR technology by the end of this year. If the technology can be demonstrated to be viable, the government plans to co-fund the winning bid to build the UK's first SMR plant. The government also hopes to expand the programme's remit in the future to include gigawatt-scale projects. 

Alongside this announcement, the Chancellor launched a consultation on the reclassification of nuclear power as "environmentally sustainable" within the green taxonomy. The aim of the reclassification is to make nuclear eligible for climate-related incentives and to increase private sector investment in the nuclear sector. The government is expected to make a further announcement on financing for the nuclear sector by the end of the month. 

New UK offshore wind farm to feature recyclable blades

RWE, the German multinational energy company, has announced plans to install the first recyclable turbine blades on wind turbines in the UK. The recyclable blades will be installed as part of the Sofia 1.4GW offshore wind farm, located off the north east coast of England, and will be provided by wind turbine manufacturer Siemens Gamesa. The blades will be used on 44 of the 100 turbines being installed on the project. This follows the installation of the world's first recyclable blades by RWE at the Kaskasi offshore windfarm in Germany last year. 

Although other parts of a wind turbine are commonly recycled, previously this has not been the case for the turbine blades, as the resin used in their manufacture has been difficult to separate from the other components. This has resulted in blades being sent to landfill when they reach the end of their lifespan. By contrast, the resin used in the recyclable blades has a different chemical structure, that can be effectively separated from other elements. This will allow these elements to be recast and used for new applications at the end of their lifespan, for example, in the automotive industry, or in consumer goods such as flatscreen television casings. Sven Utermöhlen, CEO RWE Offshore Wind, stated that the implementation of recyclable blades is “a significant step in taking the long-term sustainability of offshore wind farms to the next level".

Secretary of State for Energy Security and Net Zero: A "strong case" for hydrogen blending

Grant Shapps, the Secretary of State for Energy Security and Net Zero, has stated that he can see "a strong case" for mixing 20% hydrogen into the existing domestic gas system. His comments, which formed part of his evidence to the Environmental Audit Committee last week, represent a departure from the government's previous position on hydrogen blending. In a statement, issued last September as part of a consultation by the Department of Business, Energy and Industrial Strategy, the government stated that hydrogen blending would have only a "limited and temporary" role in gas decarbonisation. 

The government plans to make a final decision on whether hydrogen will be used as a source of domestic heating by 2026. Small-scale trials, to assess how hydrogen performs in real world scenarios, are planned for next year.  

What impact could the REUL Bill have on the energy sector?  

Osborne Clarke Energy Partner, Simon Hobday, and Senior Associate, Griffin O'Rourke's, have written an op-ed, published in Utility Week where they discuss the potential impact of the Retained EU Law Bill on the energy sector, with specific regard to investment and business planning in the sector.

This article was written with the assistance of Sophie Myatt and David Herron, Trainee Solicitors.