Energy policy in the Autumn Statement

This year’s Autumn Statement was interesting for what it didn’t contain, as much for what it did, given what we had been led to believe would be announced.

Despite the Budget in 2016 suggesting the Autumn Statement would contain long term direction for the carbon price support, this was not forthcoming. Instead the Chancellor announced that it would again be capped to 2020 at £18 per tonne of CO2, despite that having already been announced earlier in the year.  Despite no decision on whether it will still exist after that point, the Treasury continues to forecast income from it, suggesting the Government is somewhat tying its hands should it decide to scrap it in due course.

Likewise the energy retail sector will be breathing a sigh of relief, having expected much more substantial action to figure out whether the market is working for consumers. Instead Hammond’s comments suggested the Government would simply ‘look at the retail energy market’.  Greg Clark was involved in energy policy 6 years ago when the Conservatives were considering such a move, and so this déjà vu will likely contain an element of him not being fully satisfied with the market but also keen not to upset business any further, as per the direction from Number 10 post-Brexit.

Interestingly, it was announced that future of the Levy Control Framework will be revealed in the Budget 2017, which will now be in the autumn. This means the Government needs another 18 months to determine how exactly to fund renewables post-2021, and the LCF is by no means certain of a reprieve at that point.  Renewables developers will surely spend much of the next parliamentary session working out what the future of renewables looks like, and at what cost they can be developed.  The Government are predicting a slight decrease in LCF spend versus the March 2016 figures, but at nearly £12bn by 2021/22 this is still represents an overspend.

In oil and gas, the Chancellor assured the sector that there would be no changes to taxation, and as a result the Green Book is forecasting a recovery in tax receipts from the North Sea in 2017, and plateauing at around £2bn net to 2021/22.

Despite every effort to encourage shale gas, the technology’s development remains hamstrung by legal battles surrounding planning applications. Despite this, the Government announced that a £1bn Shale Wealth Fund would be made available to local communities over and above industry schemes.  Again, local communities will determine how that is spent, in the hope that more will sign up to encourage the technology.

Michael Stott

Hill & Knowlton Strategies Search