Autumn statement: the initial reaction

UPDATED: The chancellor’s autumn statement has come and gone with very little mention of energy, aside from a fleeting announcement that the government would review the energy retail market. The statement has received mixed reaction from the industry.

In his first autumn statement, chancellor Philip Hammond announced that the government will “continue to consider the appropriate mechanism for determining the carbon price in the 2020s”. A more detailed document published after the statement said the Carbon Price Support (CPS) will continue to be capped at the current rate until 2020/21.

The document also said the government is “continuing to work with stakeholders” to produce an emissions reductions plan to meet the fifth carbon budget which it committed to in June, and is “considering the future of the Levy Control Framework which it will set out at Budget 2017”.

The Shale Wealth Fund will hand out up to £1 billion to local communities over and above industry schemes and other sources of government funding. The communities themselves will determine how the money is spent.

And the National Productivity Investment Fund will spend a further £390 million by 2020/21 to support ultra-low emission vehicles, of which £80 million will go towards ULEV charging infrastructure.

Here is some of the initial reaction to the statement.

Martin Pibworth, managing director for wholesale, SSE

“SSE has consistently advocated for carbon pricing as a cost-effective way to meet the UK’s energy objectives. It therefore welcomes the government’s reaffirmed commitment to carbon pricing by maintaining the Carbon Price Floor to April 2021. SSE will work with government and partners to make the case for carbon pricing into the 2020s.”

Jonathan Marshall, energy analyst, Energy and Climate Intelligence Unit

“Despite claiming to provide certainty to businesses, Mr Hammond has failed to offer any clarity for the energy industry beyond the short term. Freezing the carbon price support to 2020 was already announced in the March Budget, while deciding on the future of the levy control framework has been delayed until next year.

“Considering the long-term nature of energy investments, clarity more than three years into the future is vital for the industry. Vast swathes of the UK’s generating capacity are reaching retirement age, and long-term clarity on carbon pricing would provide investors with the platform to back much needed new low-carbon equipment.”

#AutumnStatement detail on retail review sparse. Green paper in Spring 2 ‘examine markets which are not working fairly for consumers’

— Gareth Miller (@garethmillerCE) November 23, 2016

Martin Baxter, chief policy advisor, IEMA

“Today’s autumn statement has provided some level of confidence for business in terms of investment at a time of uncertainty, which is a welcome move. Investment in infrastructure, industry and skills is a strong trinity of themes that together, will bolster the UK’s resilience, competitively and productivity.

“Given this direction, we are looking to the government to ensure that environment and sustainability skills are absolutely central to this programme. We are disappointed that this hasn’t thus far appeared to be prominent. We look forward to seeing this come through in the imminent industrial strategy, the emissions reduction plan and the 25-year environment plan.”

“Having said that, this statement has done little else to demonstrate government’s commitment to environment and sustainability issues. Could do better.”

Mark Richards, partner and head of infrastructure, Berwin Leighton Paisner

“Apart from announcing a review of the energy retail market, the statement was worryingly light on announcements for the energy sector. With the abolition of Decc, is this a shift from the government’s commitment to decarbonisation?”

Gary McGovern, energy and planning partner, Pinsent Masons

“After recent subsidy upheaval, the renewable energy industry requires government to take a more transparent and consistent approach. Long-term transparency and stability and a clear direction of travel is critical to promote investor confidence, allow informed investment decisions and safeguard investment for years to come.

“We need a clear picture of the budget level beyond 2020/21 to safeguard the future of UK renewables. A clear understanding of the LCF, the timetable of future CfD auctions and which technologies will benefit would demonstrate a continued appetite for clean tech. This will be important if UK renewables is to avoid capital going overseas to emerging renewable markets offering greater stability.”

Tim Rotheray, director, Association for Decentralised Energy

“We welcome the government’s commitment to improve the UK’s productivity, as boosting productivity is the most effective way to support economic growth.

“Improving energy productivity should be an integral part of both the Productivity Investment Fund and the new money for the Local Growth Fund. The remaining third of the funding that is yet unassigned should be dedicated to seizing the energy productivity opportunity.

“As our 2016 Energy Productivity Audit showed, the UK economy produced £193 billion more in goods and services over the past five years using the same amount of energy, supported by energy efficiency investments by the industrial, services and domestic sectors. By making energy part of their productivity ambitions, the chancellor will only drive further economic success.”

Joanne Wade, chief executive, Association for the Conservation of Energy

“The evidence clearly shows that investments in energy efficiency deliver impressive productivity results for the UK economy, with our recent energy productivity audit showing the country producing billions of pounds more every year for the same amount of energy.

“Building houses and supporting businesses without helping them to use their energy as efficiently as possible would be an own goal. If the government wants to ensure it gets results quickly and effectively, it should make energy productivity infrastructure a key part of the Productivity Investment Fund and for the Local Growth Fund.”

Johan Ostlund, director, Cooper Ostlund

“My only surprise is that not I’m not surprised. A failure to commit to the long-term future of the industry has continued to see subsidy rates degressed. In fact, as part of the latest government review, expenditure on the FiTs scheme has been cut to between £75 million and £100 million from January 2016 to 2018/19. In addition, last month saw the latest round of RHI degressions, creating an undeniable pressure on the market.

“The autumn statement most definitely reflects this. The £23 billion National Productivity Investment Fund for innovation and infrastructure is welcome as we very much see technology as the driver of change within renewables. However, the announcement that the carbon price floor will remain frozen is positive but will hardly light a fire of excitement. What more the £390 million on ‘future transport technology’, including driverless cars, renewable fuels and energy-efficient transport is – in all realistic terms – a mere drop in the ocean.

“The Paris Agreement is ambitious and bold, and we needed to reflect that. A missed opportunity.”