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Osborne wrong-footed some of his opponents by finding extra cash for infrastructure spending in the Budget.
Chancellor George Osborne patted himself on the back and “walked tall” last week as he laid claim to a recovering economy and improved living standards across the country.
But, in his last budget before the general election, what did Osborne’s Budget have in terms of plans for the future and paying for the monumental shift to a low-carbon economy? This week’s Lobby explores his promises for infrastructure and planning support from a utilities perspective.
The energy sector’s old guard will have welcomed the tax breaks for offshore oil and gas, but perhaps the most remarkable and controversial infrastructure announcement concerned tidal energy.
Many renewable energy advocates welcomed Osborne’s endorsement of the Swansea tidal lagoon, but others felt a better return on investment could be achieved elsewhere. Ben Warren, environmental finance partner at EY, for instance, commented: “We have seen a very slow passage of market reform, and the late introduction of the CfD [contract for difference] regime has made it very difficult for developers to sanction investment in new projects. It would be hugely beneficial for the UK renewables sector to see the same level of support for already proven and cost-effective renewables.” The proposed strike price of £168/MWh for the first lagoon in Swansea is certainly eye-watering (see p19).
Perhaps hoping to balance this risky splurge, Osborne ensured that other energy infrastructure announcements were firmly focused on reducing system costs. His commitment to introduce competitive tendering for onshore transmission links, as is already the case for offshore links, should help.
For water companies, there was little fodder this year, though a promise to add £16.8 million to existing government spending on flood defences over the next four years should help to strengthen resilience.
Non-specific to utilities but essential to the creation of smart infrastructure across the board, Osborne’s gift of £40 million for commercial exploitation of the “internet of things” should create more scope for utilities to explore their role in future cities and a world of smart generation, distribution and consumption.
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