Comment by Guy Newey, Chief Executive Officer at Energy Systems Catapult. 

What does the Budget mean for the UK’s clean energy innovators? We expected a focus on energy given the last 18 months of instability brought about by fluctuations in the global energy market, and extra support for billpayers will no doubt be a relief to households across the country.

The Budget also demonstrates how this government is leaning into the clean energy opportunity – investments in Carbon Capture Utilisation and Storage (CCUS) and Small Modular Reactors (SMRs) for instance, represent a shot in the arm for the UK’s decarbonisation ambitions. While the proposal for new research “hubs” across the country are also welcome as part of a broader effort to bolster the UK’s innovation ecosystem.

Investing in CCUS

2023 is the year government puts industrial emissions in its crosshairs. Industrial clusters such as Teesside and South Wales are responsible for over half of the UK’s industrial emissions. Many of these industrial clusters are ideally situated for the use of CCUS for abatement and/or negative emissions. Industry needs a helping hand, however, to get the technology moving, in a sector where the UK has real potential for global leadership. Having been in the room when the last CCUS competition was cancelled, I know this commitment by the government will help sooth frayed industry nerves.

Jeremy Hunt’s proposed £20 billion investment over 20 years will help finance projects that will help to store 20-30 million tonnes of carbon dioxide every year by 2030. To reach our 2030 targets, the Chancellor has committed to having spades in the ground by the end of 2024. This is ambitious. Anyone who knows England’s planning regime will know that Hunt has a battle ahead of him. Planning is now a blocker for almost every class of clean energy investment, from networks (where our Chairman Nick Winser is the Electricity Networks Commissioner looking at how to speed up planning) to offshore wind and renewables. Moving faster on this will require further political will and bravery.

Funding early-stage deployment is just one part of the solution. We need to think about the longer-term framework for supporting technologies like CCUS and ensure that CCUS is an attractive, viable solution for clusters. We need to address the misalignment of incentives to decarbonise that exists across the entire economy. A broad-brush solution won’t work – at Energy Systems Catapult we advocate for sector-based carbon policies that align to the UK’s Carbon Budgets. Sector-specific policies can help us decarbonise while ensuring that industry remains competitive internationally. For example, government is due to shortly set out its plans to impose standards on producers at the border on imported products.

Green light for nuclear

Another potential UK comparative advantage is nuclear. Support for nuclear has been steadfast for 20 years, but progress has been slow. This Budget focused not on the big projects, but more on SMRs. Hunt and the recently minted Secretary of State for the Department for Energy Security and Net Zero (DESNZ), Grant Shapps, are set to sponsor a new competition through Great British Nuclear (the newly formed delivery vehicle for nuclear projects), seeking to speed up the development and deployment of SMRs.

In addition to the competition, the government has already committed to investing £210 million into the Rolls-Royce SMR project. Only by committing to a standardised nuclear program can we sustain the learning curve and trigger the virtuous cycle of economic performance as supply chain capabilities are developed, and perceived technological, project delivery, and financial risks fall. This vote of confidence from government is welcome and will help to further diversify our energy mix.

It is great to see this support for the big stuff. The next challenge for the government to start grappling with is how this smorgasbord of new clean technologies is going to fit together. This is as big an innovation challenge as any of the progress we have made on renewables and means unlocking the potential of flexible technologies like storage and demand side response. If we don’t get this right, the faint sound of our creaking grid will get louder.

Backing research & development

Funding has been announced for 12 new investment zones based around elite universities to help them become research and development hubs. With £80 million per hub up for grabs, we can expect to see the UK’s best and brightest fuelling economic growth and driving decarbonisation.

At the Catapult, we see first-hand what a difference practical support can make to the UK’s innovators; the success of our Energy Launchpad is testament to this with the energy start-ups we’ve worked with securing £65million in investment and funding in the last year alone. If you give innovators the help and support they need to thrive, they can – and will – help transform the UK’s energy system, while attracting investment and creating jobs.

Hunt has referred to the Budget as a ‘clean energy reset’. This implies that we’re starting anew. For me, this is a doubling down on clean energy. We’ve made great strides in developing and deploying renewables over the last few years.

This Budget will help us drive progress on other key technologies. The next challenge is how we create an overall system that works for consumer, the environment…and for geopolitics.