Housing:
Chancellor John Healey made big moves with household energy prices in the budget – extending the VAT freeze for energy prices, providing a £100 Household Energy Payment for up to 20 million households in bands A to D in England and the Warm Homes Loan scheme (announced on Tuesday).
Josie Murdoch, analyst at energy think tank Ember, said: “The government knows that rising oil and gas prices are driving the cost of living and that levies artificially inflate the price of power, but this Budget has missed the opportunity to deliver bold change. We need strong, definitive action to make electricity cheaper and unlock electrification of heating and transport.
“The Budget makes some small changes moving in the right direction, but ultimately it maintains the status quo, leaving British households exposed to price spikes from fossil fuels for longer.”
Meanwhile, the abolishment of the gas standing charge seems to have caused confusion with consumers.
Luke Cuthbertson, Head of CX Consulting Practice at Route 101, a customer experience specialist, said: “Energy bills are already notoriously difficult to decipher, and removing standing charges may create more questions than answers. What every customer will want to know is simple: will I personally pay more or less? Until they can see what the change means for their own household, uncertainty could quickly translate into worry and a surge in calls to energy providers.
“The irony is that standing charges became commonplace partly because the previous dual-rate system confused consumers. Now, shifting those costs back into unit rates risks creating a new clarity problem. Without careful explanation, a reform designed to make bills feel fairer could make them even harder to understand.”
Sustainability:
In a controversial move, Mr Healey announced the exemption of smaller housing developments on brownfield land from Biodiversity Net Gain requirements, making it cheaper and simpler to build.
Andy Morrison, Director of UK Property Development said: “The proposed changes to brownfield development are a positive step, but the Government must go further in removing the obstacles that prevent housebuilding at scale. Without meaningful reform, there’s a danger that today’s investment delivers far less than its headline promise.”
However, this announcement has also been met with concern, as it compromises biodiversity at the gain of easy construction.
Dom Higgins, head of health and education at The Wildlife Trusts, says: “Exempting brownfield developments from Biodiversity Net Gain reduces access to nature in the communities that need it the most and will remove one of the biggest opportunities to bring trees, ponds, wildlife and parks back into towns and cities.
“Access to nature should not be a luxury. We know that designing housing and infrastructure with trees, parks and space for nature is proven to improve mental and physical health and boost people’s pride in their communities. These habitats also provide vital shade and cooling effects during heatwaves, along with helping to reduce the risk of flooding.
“For a Budget that promised ‘breathing space’, this decision risks undermining the very thing that could give millions of people living in urban areas more space to breathe.”
This sentiment was echoed by Penny Simpson, Partner and Head of Environmental Law and the Natural Capital Legal Team at Freeths, who said:
“While not unexpected, this is a disappointing decision. Brownfield sites can be rich in biodiversity, and exempting further developments from biodiversity net gain requirements risks weakening demand for biodiversity units. That demand is vital if the Government wants private investment to support nature recovery.
“There is a clear tension between today’s announcement and the Government’s commitment earlier this week to grow private-sector demand for nature. Ministers cannot expect natural capital markets to flourish while simultaneously removing demand drivers.”
Data centres also made a splash (although they won’t with the new water regulations), after Healey announced that a new Data Centre Covenant will unlock the infrastructure Britain needs to lead on AI.
Sam Sherlock, Head of UK Corporate Account Management at SEFE Energy UK said: “Allowing data centres to generate power onsite while awaiting grid connections and capacity could be a significant step towards unlocking the UK’s AI ambitions. But it also presents an opportunity to rethink how these facilities secure their energy over the longer term.
“A combination of onsite and offsite generation, as well as exploring flexible electricity contracts, could give operators greater control over energy costs, security of supply and sustainability. As large consumers of energy with fluctuating demand, the key for data centres will be developing energy strategies that remain commercially viable long after grid connections are secured.”
Strategic projects seeking enhanced government support will be expected to meet stringent tests on community investment, energy costs, supporting British industry and jobs and strengthening our national security.
Kirsty Harrower, partner at Norton Rose Fulbright, said: “The Data Centre Covenant could help unlock strategically important projects in the UK by accelerating access to grid capacity and the planning process.
“However, it should be noted, according to the Covenant this support will come with greater expectations around energy and water use, community benefits and security. The key question for developers and project owners will be how the Government defines which projects qualify as ‘strategic’.”
Renewables:
With a statement surrounding moving renewables onto fixed-price contracts, the question seems to now be what the next step will be to stabilise energy prices – as many thought more would be said on this topic during the budget.
Sonya Bedford MBE, partner at law firm Spencer West LLP, said: “Moving existing renewables onto well-designed fixed-price contracts could give generators greater certainty and protect consumers against gas price spikes. But that reduces our exposure to gas prices; it does not remove it altogether. The contract terms must deliver value for consumers while respecting existing financing arrangements and power purchase agreements, which were entered into with good faith and a fair amount of struggle to get there!”
(Lack of) Rosebank:
The UK was on tenterhooks when energy came up in the Chancellor’s speech, followed by a deep breath when he mentioned Jackdaw – yet it was not followed by a decision on whether or not to proceed with the Rosebank oil field.
George Morrison, CEO of Aquaterra Energy said: “If the government wants North Sea revenues to help fund the UK’s energy future, its tax policy needs to support the investment that generates them. The Budget’s commitment to the Energy Wealth Fund makes a credible investment environment for the basin all the more important.
“Last week’s approval of Jackdaw recognised the value of domestic production, with the Chancellor confirming in his speech today that it will add an estimated £2.9 billion to the UK economy. The government should now follow through by approving Rosebank. A credible pipeline of projects gives businesses the confidence to develop their workforces and invest in their capabilities. Individual approvals are welcome, but businesses need visibility of work beyond the next contract to commit to long-term investment in the UK.”
Investment in energy:
A long standing plea to the government has been to make green energy more investable. Mr Healey seemed to believe he had achieved this – the industry doesn’t quite agree.
Tancrede Fulop, Senior Equity Analyst at Morningstar, said: “For investors, this funding shift is unlikely to have a significant impact on the economics of renewable projects.
Healey also said the government plans to move older renewable projects onto fixed-price contracts to reduce the link between gas and electricity prices.
This reinforces a policy direction first put forward by former Chancellor Rachel Reeves. For companies with the greatest exposure, including SSE, RWE and Orsted, the financial impact will depend on the fixed prices ultimately agreed under those contracts.”
The term ‘regulatory certainty’ has also come up in swathes in reaction to the announcements, as it is something the industry is still waiting on – despite promises of cuts on unnecessary regulation.
Richard Caten, CEO of land management, consents and stakeholder engagement consultancy Ardent said: “While the additional £20.4 billion committed to the National Wealth Fund and British Business Bank is a welcome step, explicitly designed to leverage billions more in private sector investment, funding alone cannot solve Britain’s infrastructure challenges. Grid connection delays, regulatory bottlenecks and delivery uncertainty continue to frustrate a private sector that is ready and willing to invest.
“The UK is in a fierce global race for clean energy capital, and others are moving faster while offering greater regulatory certainty. The harsh reality is that international investors will not wait around for Britain to get its house in order.”
As usual, the industry is split down the middle on whether or not some parts of the budget are positive or negative.
However, the energy sector seems to agree on one thing: the action taken today was not enough to drive real change.
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