Healey sets new tests for clean power projects in energy reform

Chancellor John Healey today said the government will only buy and build new clean power projects that lower bills and can connect to the grid, as he set out what he called a new course to bring UK energy costs down in line with Europe.

Presenting his first Budget, Healey told MPs the government’s priority was now “first and foremost cheaper energy with clean power key to achieving this”. He said the government remained committed to net zero by 2050.

Renewables and the grid

Healey said more older renewables would be moved onto fixed price contracts to “further break the grip of international gas prices on our bills”.

New projects already compete for fixed prices through the Contracts for Difference scheme. Its seventh allocation round secured 4.9GW of solar and 1.3GW of onshore wind in February.

The Chancellor said GB Grid would deliver cheaper, faster grid connections, alongside reform of “the complex web of institutions that govern the system”. When wind farms set a generation record of 22.7GW last November, Electric Home reported that the grid operator Neso had spent nearly £1.3bn that year managing wind-related transmission constraints.

Critical data centres that meet the terms of a new British data centre covenant will get grid connections and, where necessary, be allowed to build on-site generation while they wait.

Levies and costs

Healey said policy costs had for many years been loaded onto household bills through levies. “Today, I am putting an end to that,” he said.

A new cost control framework will cover all aspects of energy bills, and the upcoming Gas Shippers Obligation, a levy to fund hydrogen projects, will be scrapped, with those projects backed directly by government instead.

The Chancellor said the reforms “won’t happen overnight” and would be carried through the Prime Minister’s ten-year plan. He also pointed to last week’s approval of the Jackdaw gas field, which he said would add an estimated £2.9bn to the UK economy, and the launch of a new energy wealth fund.

Healey said gas prices had nearly tripled since February because of the war in the Middle East. For industry, a new British Industrial Competitiveness Scheme will take 25 per cent off electricity bills for 10,000 firms from April. The CBI told Healey in September that business costs, including energy, were holding back investment.

Reaction

Molly Monks of Parker Walsh said: “The Government’s plans to reform how energy costs are structured could be important over the longer term, particularly if they reduce the underlying cost of operating a business rather than simply offering short-term relief.”

Peter Brennan, director general of UK Steel, said: “The Government cannot deliver reindustrialisation on uncompetitive electricity prices.”