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New Energy World
New Energy World embraces the whole energy industry as it connects and converges to address the decarbonisation challenge. It covers progress being made across the industry, from the dynamics under way to reduce emissions in oil and gas, through improvements to the efficiency of energy conversion and use, to cutting-edge initiatives in renewable and low carbon technologies.
UK Chancellor Jeremy Hunt announced a raft of new tax measures in his Autumn Budget, bringing UK taxation to the highest level since World War 2. Energy-related measures were particularly significant and included a new windfall tax on low carbon electricity generators, and the introduction of a vehicle excise duty on electric vehicles by 2025.
Let’s look at the statement in detail.
Energy bills: Many were concerned to learn that help with escalating energy bills is being scaled back. From April 2023, average annual household energy bills are to rise from £2,500 to £3,000, with a raised energy support guarantee in response to soaring wholesale gas prices. It is estimated that annual bills would hit £4,000 without support.
Hunt offset most of the savings through additional cost of living payments to households on mean-tested benefits, with £900 for those on working benefits, £300 to pensioner households and £150 for those on disability benefit. He estimated that an extra £1bn will enable a further 12-month extension to the household support fund.
Fuel and vehicle duty and EVs: The Treasury has long expressed concern that adoption of electric vehicles (EVs) would reduce government revenue from fuel and vehicle excise duties (VED). Hunt aims to rectify this with a controversial move to raise fuel duty by 12 pence per litre next year. This will be a record increase and the first for over a decade.
What’s more, EVs will no longer be exempt from VED from 2025 and will have to pay £165 for cars and £290 for vans. The Treasury anticipates that the charges will raise £1.6bn by 2027–2028. The Office of Budget Responsibility (OBR) estimates that the government’s initiative to raise fuel duty for the first time since 2011 will bring in £5.7bn.
Patrick Reich, Co-founder and CEO of EV charging app Bonnet, was disappointed by the new EV tax measure and said: ‘At this critical time for our environment it is infuriating that the UK government would throw up a new barrier for people looking to change from a polluting car to electric power. We should be speeding up the transition to zero emission transport, not slowing it down. While it’s accepted that as millions more people climb into EVs they would eventually have to pay some form of road pricing, the proposed 2025 timetable is too soon and could discourage people from switching earlier.’
Windfall tax extended: The 25% windfall tax on North Sea oil and gas company profits will rise to a 35% levy and has been extended to 2028. The proposals are forecast to generate tax revenues of £41.6bn from oil and gas companies. Furthermore, a 45% levy is to be issued on low carbon electricity generators to curb the extra profits they have made from the wider rises in energy prices since the Ukraine war began. This measure aims to raise about £14bn next year from generators including solar, wind and nuclear plants above a certain threshold from 1 January 2023 until March 2028.
The Autumn Statement noted: ‘The structure of the energy market means high oil and gas prices are driving up the cost of otherwise cheap low carbon electricity. The government is introducing an “electricity generator levy”, a temporary 45% tax that will be levied on extraordinary returns from low carbon UK electricity generation.’ The tax will be limited to generators whose power generation output exceeds 100 GWh across a period and will only apply to extraordinary returns exceeding £10mn.
According to the OBR, the tax take from oil and gas companies is on course to reach its highest level of its share of GDP since 1985. Despite former debate in the Tory party, Hunt claimed: ‘I had no objection of windfall taxes if they are genuinely about windfall profits caused by unexpected increases in energy prices. But any such tax should be temporary, not deter investment and recognise the cyclical nature of many energy businesses.’
Nuclear plans and energy efficiency: Hunt also approved the building of the Sizewell C nuclear power plant and pledged to spend £6bn making UK homes more energy efficient. He said that the measures would protect energy supplies and ensure that the nation could not be ‘blackmailed’ by oil exporters such as Russia.
Polly Billington, Chief Executive of UK100, welcomed the Chancellor’s energy efficiency initiative, but suggested: ‘It would be better if he were to listen to the experts in local government about how to spend money more wisely, especially since it appears his announcement of £6bn investment in energy efficiency is not new money.’ She continued: ‘Jeremy Hunt is taking a small step in the right direction – but he needs to run, not walk.’
Meanwhile, Nick Pocklington, CEO of Good Energy, affirmed: ‘Investment in energy efficiency is crucial today. It requires a mass insulation campaign today, not a taskforce to look at extra spending in three years’ time.’
Following the government giving the green light to Sizewell C, Vince Zabielski, a former nuclear engineer and partner at international law firm Pilsbury, said: ‘It is difficult to overstate the importance of the government backing Sizewell C. Nuclear has a huge role to play in the energy transition, with Sizewell C expected to provide up to 7% of the UK’s energy needs, but it has often fallen victim to political headwinds. I think the announcement is a clear sign that the government has recognised the importance of nuclear both as a green energy source and for the jobs it provides.’ However, he recognised: ‘There’s still more to be done, given we’re set to see a number of smaller reactors go offline.’