UK Autumn Statement 2022 – Energy Highlights

Taxes and Energy: two of the key themes that emerged from the Chancellor’s 2022 Autumn Statement, each a reflection of the current geo-political background. Today the Chancellor sought to present the Government’s plan to stabilise the economy, reduce inflation, provide support to those suffering from the effects of increasing energy bills and ensure long-term sustainable energy security. From an energy perspective, a number of key announcements were made:

Energy

The Government took the opportunity to re-enforce its commitment to cheap, low-carbon, reliable energy sitting at the centre of the economy. Long term energy independence and energy efficiency is now at the forefront of the Government agenda, with the Chancellor seeking to build on the fact that last year nearly 40% of the country’s energy came from offshore wind, solar and other renewables. To do this, the Government is seeking a “major acceleration” in homegrown technologies such as offshore wind, carbon capture and “above all, nuclear”.

The Chancellor therefore announced that the Government will proceed with the new nuclear power plant at Sizewell C. He stated that, subject to final government approvals, the contract will be signed by the relevant parties in the coming weeks. This will create 10,000 highly skilled jobs and provide reliable low carbon power to the equivalent of six million homes for 50 years.

A new “national ambition” was also announced, seeking a 15% reduction in energy consumption by buildings and industry by 2030. The Chancellor also re-confirmed the £6.6bn investment in energy efficiency within this government and announced a further £6bn of funding commencing in 2025. We understand that the Secretary of State for BEIS will announce further details and launch a new energy efficiency task force shortly.

Energy Price Guarantee

Further to the Energy Price Guarantee announced by the former Chancellor (see more here), the Chancellor announced that from April 2023, the guarantee will increase the limit on average household energy bills from £2,000 to £3,000. There will also be additional cost of living payments of £900 to households on means tested benefits, £300 for pensioner households and £150 for individuals on disability benefit. In addition, households using alternative fuel sources (such as heating oil and LPG) to heat their homes will have their support doubled from £100 to £200.

Tax: energy windfall

The Energy Profits Levy placed on North Sea oil and gas operators will rise from 25% to 35% on 1 January 2023 and will be extended to March 2028. The Chancellor stated that he was not opposed to windfall taxes so long as they genuinely seek to address windfall profits caused by unexpected increases in energy prices. Any such tax should, in the Chancellor’s view, be temporary, not deter investment and recognise the cyclical nature of the energy business.

An additional 45% levy on low carbon electricity generators (including nuclear, wind and solar sources) will come into place on 1 January 2023 as a result of the windfall profits that the Chancellor has deemed low carbon electricity generators to be receiving. The Chancellor’s view that windfall taxes should not deter investment is already being questioned by industry experts, with a fear that as a result of this levy, investment in renewable energies could be negatively affected.

Tax: electric vehicles

From April 2025, electric vehicles will no longer be exempt from vehicle excise duty. The Chancellor described this as an attempt to make the motoring tax system ‘fairer’, following the prediction from the OBR that by 2025 over half of all new cars will be electric. Some motoring groups have given this news a cautious welcome as a boost to funding for road infrastructure while others have raised concerns that it may reduce demand for EVs and be a set-back for the transition to net zero transport.

Climate Obligations

The Chancellor confirmed that now was not time to step back from the country’s international climate obligations. He re-stated the Government’s commitment to the Glasgow climate pact agreed at COP26, including a targeted 68% reduction in the country’s emissions by 2030. This comes in the wake of the COP27 summit: see our COP27 page for more coverage of this year's summit and to register for our post-COP webinar on 22 November.

In summary, the 2022 Autumn Statement presents a mixed picture for the energy industry. Whilst the Energy Profits Levy is increased and extended and a new levy introduced on low carbon electricity generators, the Government has solidified its commitment to investing in long term sustainable energy – seen through the confirmation of Sizewell C. The government is seemingly seeking to balance the need for all corners of society, including the energy industry, to shoulder the burden of stabilising the economy, with the need to invest in renewable energy to secure long term energy security and efficiency. 

If you would like to know more about how these announcements might impact your business, please do get in touch.