And he confirmed that the UK will become the first country to commit to legally binding targets for reducing CO2 emissions - a reduction of 34% by 2020.
So how did renewable energy fare in the UK 2009 budget? Amongst the measures announced are the following provisions:
£525 million will be made available through the Renewables Obligation (RO) over the next two years to push forward the development of offshore wind projects. This an uplift in support for offshore wind investments that reach financial close between now and 2011 through the RO. The UK Government hopes to ensure the UK remains an attractive destination for wind investment, and therefore Budget 2009 announces a banding review with the intention of increasing the banding of Renewables Obligation Certificates (ROCs) from 1.5 to 2.0 for offshore wind projects meeting specified completion criteria if they place new orders in 2009-10, and then 1.75 in 2010-11. This is expected to provide £525 million support from 2011 to 2014, protecting 3 GW of proposed investment over the next two years.
Extra funding from the EIB
Budget 2009 announces that UK renewable and energy projects stand to benefit from up to £4 billion of new capital from the European Investment Bank (EIB) through direct lending to energy projects and intermediated lending to banks. The Government is bringing together the EIB, banks and developers to ensure this new framework lending and other products deliver rapid and sustained investment for UK renewable energy. The Government believes that this initiative can bring forward £1 billion of consented small and medium-sized UK renewables projects to deployment.
Budget 2009 announces an additional £375 million to support energy and resource efficiency in businesses, public buildings and households across the economy over the next two years. This breaks down as follows:
- £100 million extra to improve the insulation for 150,000 homes in the social sector through the Decent Homes programme in England;
- £100 million, as part of the new housing package, for the construction of new homes at higher energy efficiency standards;
- £100 million of new funding for low-cost loans, delivered through the Carbon Trust in England, helping around 3,500 small and medium-sized businesses;
- £65 million of new funding for loans to install energy efficiency measures in public buildings, delivered through the Carbon Trust Salix Scheme in England;
- £10m for grants in 2009-2010 for waste infrastructure.
Small scale renewables
The UK target to generate 15 per cent of energy from renewable sources by 2020 will need more energy to be generated and supplied by small-scale renewable energy technologies (such as solar power and heat pumps) and community heating schemes, where heat is generated centrally and transmitted via pipes. These can be a cost-effective way of generating low-carbon energy. Budget 2009 announces modest measures to support decentralised smallscale renewable and community energy:
- £45 million for small-scale renewable electricity and heat technologies, primarily through the Low-Carbon Buildings Programme;
- £25 million in funding for low-carbon community heating schemes.
Combined Heat and Power (CHP)
The Government’s long-term strategy to support this sector will be set out in the heat and energy saving strategy, later in 2009. However, today's announcement extended the climate change levy exemption for indirect sales of CHP electricity from 2013 to 2023, subject to State aid approval (worth a total of £2.5 billion). The Government will also commit to continuing other existing levy exemptions for CHP.
Budget 2009 announces that the UK Government will allocate £405 million to support the development of a "low-carbon energy and advanced green manufacturing" sector in the UK. The funding will support the development and deployment of low-carbon technologies such as wind and marine energy (for example through building facilities to test prototype models), and aims to attract investment in the UK’s low-carbon supply chain.
Reaction from the industry to follow...