Chancellor George Osborne took to the despatch box on Wednesday to deliver his 2016 Budget, outlining how he intends to run the UK economy for the forthcoming year. Energy might’ve taken a backseat, but there was still plenty to be digested within the full Budget documents that followed.
A number of headline announcements were included but, as has come to be expected, the only certainty on offer was yet more uncertainty. The Budget actually resulted in further questions arising, many of which the renewables industry will need answers for sooner, rather than later.
What’s happening with the VAT case?
There was plenty of expectation that Her Majesty’s Revenue & Customs would confirm the results of their consultation into a potential increase on solar module to 20% on Wednesday, but the document was never published. This came against news that the European Union could be about to reform its own VAT directives, and has subsequently been followed by suggestions of a friction within the Conservative Party. The matter plays perfectly into the hands of Eurosceptic MPs ahead of July’s Brexit referendum, and the topic is now at risk of become politically volatile. The Solar Trade Association has suggested that a verdict is still expected before the Autumn, but that it might now not be as cut and dry as once thought.
Will solar and onshore wind be offered any support under CfDs?
Osborne’s revelation that £730 million would be allocated for renewables auctions was certainly surprising. Perhaps less surprising was the detail, buried within the full Budget document, that the funding would be allocated solely to offshore wind and other “less established renewables”. The funding is said to be entirely new money so will not fall under the next Levy Control Framework allocation, however solar again looks set to be snubbed. Subsidy-free CfDs – or ‘market stabilising contracts’ as DECC refers to them as – could yet be offered, but with still no word on their design solar developers remain in the dark.
How will the business carbon reporting reforms affect commercial solar?
The abolishment of the Carbon Reporting Commitment for businesses from April 2019 onwards and extension of the Climate Change Levy to take its place will change the way businesses view their energy efficiency commitments. Tax breaks on offer through the Climate Change Agreement will therefore be all important, thrusting more impetus behind the commercial solar sector. Installing solar PV for businesses will in the future make good business sense on a number of fronts, adding to the growing list of factors supporting a boon for that side of the solar market. The government is to consult on a new reporting mechanism later this year, after which more will become clear.
Does Osborne really mean the National Infrastructure Commission’s energy recommendations will all be put into action?
The chancellor supporting the findings of a report authored by a commission his department helped launch, and conducted by a man he himself appointed, is not all that surprising. But the report was a transparent recommendation that the country turn towards a smarter, more flexible grid network built on distributed generation and storage – almost entirely against the government’s current support for Hinkley Point C. If Osborne does indeed intend to put into place the report’s recommendations in their entirety – as he suggested on Wednesday – then solar will play a pivotal role in that vision being made reality. £50 million for innovation in energy storage, DSR and other smart technologies over the next five years is a start, but nowhere near enough to support the NIC’s findings in full.
Is the chancellor waking up to the energy and climate challenge at hand?
While the policy promises included in this year’s Budget are less ambitious than most would’ve hoped for, they’re more than Osborne has committed to since last May’s election victory. The £730 million fund for CfDs is certainly evidence of at least some of DECC’s messaging breaking through the Treasury’s defences, and should be recognised as a win for Amber Rudd. With the government still to legislate for the fifth carbon budget before the end of the year and COP21 looming large, there will be significant pressure on DECC, Rudd and Osborne to lead from the front. The UK is just shy of a year into this parliamentary term and despite all that the renewables sector has endured in the last ten months, there is still time for Osborne – fingers burned by the increasingly toxic Hinkley debacle – to bring renewables in from the cold. The announcements above, and greater defence of the solar industry from the VAT increase, might just be evidence that HMT is starting to come round.