Utility Week

8 | 1ST - 7TH DECEMBER 2017 | UTILITY WEEK Policy & Regulation Analysis I n the run-up to the Budget, hopes were running high that the government had been won round to the argument for low- carbon energy. Perhaps most importantly, the Clean Growth Strategy, recently published by the Department for Business, Energy and Industrial Strategy (BEIS), rejected the idea that there had to be a trade-off between being green and economic prosperity. These hopes were buoyed before the Budget, when the UK announced during the international climate change agreement talks in Bonn that it would take the lead on a worldwide initiative to curb unabated coal, setting Britain at loggerheads with Donald Trump's US government. But while climate change minister Claire Perry was taking the global stage, she was clearly finding it harder to get the message heard closer to home in the Treasury. Clean growth was barely mentioned in the Budget. The update of the Levy Control Frame- work (LCF), which was published alongside the Budget, states there will be no new low- carbon levies until the cost of existing subsi- dies begins to fall. Existing commitments will be honoured, including the £557 million allo- cated for further contracts for difference (CfD) auctions in the Clean Growth Strategy and the strike price agreement for Hinkley Point C. "The good work that came out of the Clean Growth Strategy seems to have fallen on deaf ears," argues Jonathan Marshall, energy analyst at the Energy and Climate Budget disappoints The decarbonisation initiatives in the Clean Growth Strategy seem to have fallen on deaf ears at the Treasury, says David Blackman. Intelligence Unit. "We've heard a soening from BEIS, but higher up the food chain they seem to be sticking to the old script." Aldersgate Group executive director Nick Molho agrees. "There is a real disconnect between where BEIS is trying to drive the agenda and the Treasury," he says. And Greenpeace policy director Doug Parr says it is "unclear" how the Budget fits with the decarbonisation plan in the Clean Growth Strategy. The likely impact of the announcement is illustrated in a table at the back of the paper, which gives the Treasury's projec- tions for low-carbon generation until 2025. This shows that total renewable large-scale generation capacity is expected to grow from 33.3GW in the current financial year to 41.7GW by 2024/25. And the vast majority of the increase is expected to come from contin- ued growth in offshore wind capacity, which could nearly double from 7.49GW of installed capacity this year to 14GW in 2024/25. Parr argues this level of new renewable generation is insufficient to get the UK on the decarbonisation trajectory required to meet its statutory carbon emission reduction targets. Investors can glean some succour from the decision, also announced in the Budget, to maintain the carbon price until the last coal-fired stations are due to have been phased out, also in 2025. "You can bank on your forecast revenue models not changing until 2025," says Marshall. Simon Virley, head of power and utilities, KPMG "The Budget confirms that a carbon price will remain in place into the 2020s and that no new contracts for difference will be issued before 2025, beyond the £557 million already announced. But this leaves options open for what happens post-2025, which could include supporting further new nuclear projects, tidal projects, or zero- subsidy solar and wind." Lawrence Slade, chief executive, Energy UK "Over half of generation now comes from low- carbon sources and the recent CfD auction showed how far the cost of offshore wind has fallen – thanks to pro- viding the necessary certainty for investment which drives down the cost of decarbonisa- tion, benefits customers and the wider economy. Postponing further support for renewables until 2025 denies the opportu- nity for other technologies and projects to follow suit." Richard Goodfellow, head of energy and utilities markets, Addleshaw Goddard "Following on from the Clean Growth Strategy, we hoped that the Budget might set out some clear energy policy decisions, but it seems the government's focus is elsewhere – Brexit."

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