Reaction to the energy and infrastructure announcements in this year’s Autumn Statement

Shoosmiths’ head of energy and infrastructure (E&I) sector, James Wood-Robertson, details and reacts to the much-anticipated E&I developments and proposals set out in the UK government’s 2022 Autumn Statement. 

Energy

Electricity Generator Levy

Since whispers of an energy price cap, similar to that introduced by the EU, emerged from Whitehall, renewable energy generators have been seeking more information about the government’s plans and pleading for clarity and certainty.

It appears that the government has rowed back from the declarations under Liz Truss’ brief leadership that there would be no windfall tax, seemingly favouring a long-term price cap, by introducing just that- a “temporary” 45% tax on the aggregate revenue that electricity generators make in a period from “in-scope generation” at an average output price above £75/MWh. The tax will be limited to generators where in-scope generation output exceeds 100GWh across a period, and will only then apply to extraordinary returns exceeding £10 million.

According to the technical notes issued alongside the Chancellor’s statement, it will apply to corporate groups (or, where relevant, standalone companies) electricity generated from renewables, nuclear and biomass, where the generation assets are grid-connected.  The levy will not apply to generation that is subject to a Contract for Difference.

The levy will be legislated to continue until 31 March 2028 but as soon as a generator’s average revenue in a period falls below £75/MWh across its portfolio of in-scope generation assets, it will not be liable to pay the levy for that period.

UK-based generators now have the certainty that they sought – although details will need to be ironed out, specifically around what constitutes a corporate group and how will JVs and joint ownership be treated.  Much discussion is also expected as to whether £75/MWh is an appropriate threshold.  

Comparisons are already being drawn between the treatment of renewable generators and oil and gas companies, particularly the tax relief given to the sector for reinvesting profits into new (non-renewable) projects. Equivalent relief for new renewables projects would avoid that obvious criticism and would also support the government's aims to reduce energy prices, increase energy security in the medium to long term and promote clean energy generation.

Energy Efficiency Taskforce (EETF)

The statement brought the announcement of new government funding worth £6 billion to be made available from 2025 to 2028, in addition to the £6.6 billion provided in this Parliament, with a new EETF charged with delivering long-term energy efficiency across the economy. Its overarching ambition will be to reduce the UK’s final energy consumption from buildings and industry by 15% by 2030 against 2021 levels.

I look forward to seeing the remit of the EETF and the initiatives that will be introduced to deploy that funding, particularly those aimed at tackling the hardest nut to crack – household energy efficiency – as previous government initiatives aimed at this have fallen well short of their targets. 

The question remains, however, whether these measures are too little too late. With energy prices sky-high, coupled with fears that supply-side constraints could mean the UK is facing blackouts this winter, money for energy efficiency measures are not going to provide any short-term relief to the pain facing families across the UK this winter.

Vehicle Excise Duty (VED) on electric vehicles (EV) & EV charging infrastructure

From April 2025, electric cars, vans and motorcycles will begin to pay VED in the same way as petrol and diesel vehicles.

It is disappointing that financial incentives for individuals and businesses to move to EVs are being reduced when the uptake of new EVs really needs to pick up pace in order to hit the target of no new diesel vehicles by 2030. This is particularly concerning timing with all eyes on environmental implications of government policy following renewed commitments at the COP27 which has just taken place in Egypt.

On a more positive note, the government announced that it will extend the 100% First Year Allowance for EV chargepoints to 31 March 2025 for corporation tax purposes and 5 April 2025 for income tax purposes, continuing to incentivise business investment in EV charging infrastructure.

Infrastructure 

Today’s Autumn Statement noted that “Investing in high quality infrastructure is crucial for boosting economic growth and productivity” and that “Infrastructure is also the foundation for securing our energy independence and transitioning to net zero”.

No new funding or initiatives announced, but it is positive to note that no major projects have been culled.  The government’s Autumn Statement reaffirmed commitments to:

• Plans for the railways, including East West Rail, core Northern Powerhouse Rail, and High Speed 2 to Manchester.
• Supporting digital infrastructure investment through Project Gigabit, with an ambition to reach at least 85% gigabit-capable broadband coverage by 2025 and nationwide coverage by 2030.
• Securing the UK’s energy security through delivering new nuclear power, including Sizewell C (subject to final agreement), and the roll-out of cheap, clean renewables, including wind and solar.

UK Infrastructure Bank is also to be placed on a statutory footing – which will be a key institution facilitating long-term investment in infrastructure to tackle climate change and support regional and local growth.

Overall, in an Autumn Statement of tax increases, spending cuts and belt-tightening, it is no surprise that no new initiatives have been announced and, looking for the positives, it is good news at least that no major projects have been sacrificed.