12 October 2017

The government’s long awaited Clean Growth Strategy was published today – we have been reading through to see what it tells us about the direction of policy. We have put some first thoughts below and will be looking in more detail in weeks ahead and at our Renewable Futures conference.

More of a timetable than a strategy
Overall, the publication is more of a timetable than a strategy with significant policy announcements.

Many of the key areas still await decisions; including Dieter Helm’s review of energy costs and associated recommendations, the future of the Levy Control Framework and the carbon pricing announcement that we can expect in the Autumn budget.

Encouragingly, significant new and existing money is available in key sectors to ‘push’ innovation. However, the plan is lacking many firm commitments on standards or regulations that might ‘pull’ through demand for low carbon solutions.

There is a telling table on p.41 detailing the emission reduction process, which suggests that between 2018-2022 the new policies in this Clean Growth Strategy have no impact at all on emissions reduction.
 

Our thoughts on some of the announcements:

  • Positive for offshore wind

Although later than we would like, there is now a concrete date for the next CfD round, announced earlier this week to be spring 2019. Alongside this, a Sector Deal for offshore wind has been proposed, “which could result in 10 gigawatts of new capacity built in the 2020s”, and innovation funding of £177 million to reduce the cost of renewables including, offshore wind turbine technology and foundations.

  • Mixed for other generation

There seems to be no change to policy on onshore wind, despite recognition of its cost effectiveness and not much comfort to marine technologies in the short-to-medium term, citing the need to demonstrate cost competitiveness.  The same message is given to nuclear, though more positive with the restatement of commitment and good levels of innovation funding. There is also a nod to Carbon Capture, Use and Storage (CCUS), which is included as part of the hydrogen heat decarbonisation pathway.

It is interesting to note that on page 96, the plan sets out a possible pathway to decarbonise by 2032 that has over 80 per cent of power provided by renewables and nuclear supported by ‘smart’ and energy efficiency – there is no mention of gas. CCUS is then seen as playing a part in the 2030s.

  • Home solar & battery VAT confirmation

One very specific point is that the strategy contains a confirmation that installing solar panels with a battery in residential accommodation attracts a reduced VAT rate of 5 per cent. However, retrofitting a battery attracts 20 per cent VAT and there are the usual case by case caveats (page 100).

  • Energy efficiency for homes and businesses but little on heat

There is confirmation of ECO running to 2028 at least at current levels and a potential ramping up of EPC ratings for both commercial and domestic buildings for lettings.

Today also saw the publication of a new call for evidence on the Green Deal replacement, heralding perhaps a re-focus on energy efficiency.

However, the overall strategy on decarbonising heat remains unclear. The strategy contains only commitments to work towards an understanding of different cost-effective decarbonisation of heat scenarios with a report on evidence next year.

Even a relatively straight-forward regulation about the small numbers of new homes off-the-gas-grid will wait for a heat strategy that “could involve all new homes off-the-gas-grid from the mid-2020s being heated by a low carbon system, such as a heat pump.” 

  • Money for transport and managing the impact of EVs

There is a major focus on the decarbonisation of transport with 33 per cent of the money being spent on that sector. In particular, innovation funding for autonomous vehicles and charging infrastructure for EV to complement the Automated and EV bill announced in the Queen’s speech.

Despite saying that “ULEVs (ultra-low emission vehicles) on the market today are already an attractive proposition for a significant proportion of motorists”, the plan proposes to spend £1 billion supporting the take-up of ULEVs.

  • Excited about Green Great Britain Week…?

There is a strong focus on jobs and cost effectiveness throughout the plan. Areas where the report recognises that renewable and low-carbon technologies have a great story to tell. We look forward to telling it at the excitingly named Green Great Britain Week!

For further information, please find a link to The Clean Growth Strategy document below:

Author: Poppy Maltby