Budget 2024 Impact on Energy
Some good news in Budget 2024, but sadly mostly bad news on energy.
Chancellor Rachel Reeves gave her maiden Budget in the House of Commons yesterday. As we spend most of our time looking at energy policy I thought it would be helpful to issue a bonus article looking at the impact of Budget 2024 on energy.
Energy Good News in the 2024 Budget
Although it is relatively thin gruel, there were some positive announcements about energy in the Budget Statement. First and foremost, the Chancellor chose to keep the temporary 5p per litre fuel duty cut for another year and the planned increase in 2025-26 will be cancelled. The Government claims this measure will lead to a saving of £59 in 2025/26 for the average driver.
Of course, the sadistic activist zealots at Carbon Brief are up in arms about it, lamenting the “cost” to government of freezing the fuel duty since 2011 (Figure 1).
Of course, they omit to mention that fuel duty brought in nearly £25bn in 2022, so we already levy huge taxes on fuel, making it more expensive for people to travel.
The second piece of good news was the announcement of additional funding for Sizewell C. They claim they have provided £2.7bn of funding to continue the project through 2025/26, but it is not quite clear how much of this is new money. However, the final investment decision on whether to proceed with the project will be taken during the Phase 2 spending review, due to complete in late Spring 2025.
The final piece of good news is that the Chancellor has allocated “only” £125m to GB Energy (GBE) in 2025/26, limiting the damage it can do. They say that as GB Energy is established the investment activity will be undertaken by the National Wealth Fund (NWF). However, they have only allocated £5m to NWF in 2025/26, rising to £50m in 2027/28. Interestingly, both figures are only a tiny fraction of the annual average of spending on GBE of £1.7bn and £1.5bn on NWF promised in Labour’s manifesto.
Energy Bad News in the 2024 Budget
Sadly, the list of bad news items is somewhat longer. The Department of Energy Security and New Zero is going to see a massive increase in overall funding of 22% per year out to 2025/26 (see Figure 2).
The vast majority of this extra spending is on capital items, much of which will be squandered on thermodynamic abominations like Carbon Capture, Usage and Storage (CCUS) and green hydrogen.
They also plan to spend at least £3.4bn on household heat decarbonisation and energy efficiency. In plain terms, this means keeping the increased subsidies for heat pumps and spending on insulation measures. As we shall in in the main article on Sunday, most of these insulation measures have payback periods measured in centuries, and some have payback periods further away from today than the Roman occupation.
There is a further £1bn planned for hundreds of local energy schemes to decarbonise the public estate. For this read more solar panels on council buildings.
Unfortunately, the Budget 2024 bad news keeps on coming because the OBR has also delivered an updated estimate of the costs of environmental levies. These include the costs of the Renewables Obligations and Contracts for Difference subsidy schemes plus the cost of the capacity market, green gas levy and the Renewables Heat Incentive. The summary results, showing the progression from March 2023, through to October 2024 are shown in Figure 3.
The latest figures show overall green levies are forecast to rise from about £11bn in 2023/24 to a peak of £16.4bn in 2026/27, before falling back to £15.5bn in 2027/28. This is latter figure is some 122% more than was forecast in March 2023 for the same year.
[Update: 31 October 2024] I under-estimated the %-age increase between the March 2023 report and October 2024 in the original chart and text. Both now corrected. [/Update]
These subsidies and consequential costs of renewables will find their way into our bills. The £16.4bn peak is about £585 per household, up from £396 last financial year. BY disclosing this extra £189/year in green levies, the OBR has single-handedly trashed Labour’s claim to be cutting energy bills by £300. Note these figures do not include the costs of the Feed-in-Tariff, nor grid balancing cost or the extra £10bn per year being spent on grid infrastructure. Our bills are going to soar.
Our taxes are going to rise to pay for all the wasted spending on CCUS, hydrogen and uneconomic insulation measure and our bills are going up even more to pay for all the renewables. If you have any money left over after this Budget, spend it on woolly jumpers.
Finally, as a postscript, I was invited to be interviewed on NTD TV a few weeks ago. The programme aired a couple of days ago and is now available on YouTube and you can see it below. It was helpful for the interviewer to ask open questions that allowed me to cover most of the ground we cover on this Substack. Even if I do say so myself, it is well worth 45 minutes of your time.
If you enjoyed this article, please share it with your family, friends and colleagues and sign up to receive more content. This week’s main article will be published on Sunday as usual, looking at the latest missive from the Climate Change Committee.
I suppose people have given up trying to explain to politicians and the public that the British contribution to man-made emissions, like that of Australia, is only about 1%. That means both of our nations could disappear off the face of reverse and cease to contribute any emissions without making a measurable difference to the climate.
Given that, why would we contribute a dollar or a British pound, much less tens of billions, in order to obtain more expensive and less reliable power while inflicting massive damage on the environment?
Thanks for the Budget summary, and the interview is excellent - a really good summary of where we are and why, and why the current trajectory is so bad.