UK chancellor Rachel Reeves said she wants to “get Britain building again” as she delivered her government's first budget address, which contained several spending commitments with ramifications for solar and storage deployment.
Under the plans, the Department for Energy Security and Net Zero, which spearheads the UK government's approach to the energy transition, will see its annual budget increase from GBP 6.4 billion ($8.3 billion) in the 2023-24 financial year, to a planned GBP 14.1 billion in 2024-25.
Reeves did not single out solar in her speech to the Parliament, but did confirm the government will spend GBP 125 million in 2025 to set up the state-owned investment vehicle Great British Energy. Headquartered in Aberdeen, Scotland, GB Energy will be backed by GBP 8.3 billion over the five-year parliamentary term. The state enterprise will be tasked with investing in renewables projects across the United Kingdom, with the goal of attracting private investment in the process. The UK government also plans to create a new National Wealth Fund in a bid to “catalyze over GBP 70 billion of private investment” in clean energy and other growth industries.
Planning
The budget also included more cash for planning departments. Slow planning approvals are a significant roadblock to solar and storage deployment in the United Kingdom and limit the progress of grid upgrades, as well as other key infrastructure and housing projects.
Reeves has pledged GBP 46 million to recruit 300 new planning officers. Her budget also commits the government to provide an additional GBP 5 million to deliver improvements to the planning regime for Nationally Significant Infrastructure Projects (NSIP), the process by which solar projects exceeding 50 MW capacity secure planning approval in England. The NSIP process applies to solar projects exceeding 350 MW in Wales. In Scotland, the UK and Scottish governments launched a consultation in October 2024 setting out proposals to streamline the planning system for energy infrastructure projects that fall under Edinburgh’s jurisdiction.
Heat pump funds
Reeves also committed more funds to a grant scheme that has been key to supporting UK heat pump adoption to date. First introduced in England and Wales in April 2022, the Boiler Upgrade Scheme (BUS) provides grants to support the installation of more energy-efficient heating in homes and commercial buildings in England and Wales.
From May 2022 to September 2024, there were 55,095 applications for BUS grants, 97% of which were for air-sourced heat pump installations. An average air-source heat pump installation in England and Wales costs around GBP 13,000, but a BUS grant will cover GBP 7,500 of the cost.
Additional funds for the scheme are contained within the GBP 3.4 billion assigned to the government’s ‘Warm Homes Plan’, which also includes GBP 1.8 billion to support fuel poverty schemes. Budget documents also state the government will provide funds to “grow the heat pump manufacturing supply chains in the UK” but without further detail.
In Scotland, grants and loans are available through the Scottish Government’s Home Energy Scotland scheme. The Boiler Replacement Scheme in Northern Ireland closed to applicants in 2023.
Green hydrogen
The chancellor also provided some certainty for flagship green hydrogen projects in the United Kingdom, pledging to fund contracts offered to 11 projects under the previous government. The UK government’s first hydrogen allocation round (HAR1) was launched in July 2022 and awarded contracts for a total of 125 MW of capacity at a weighted average strike price of GBP 241/ MWh.
Reeves said the 11 projects would be “among the first commercial-scale projects anywhere in the world.” Cash for the hydrogen contracts is contained within the GBP 3.9 billion set aside by Reeves to fund green hydrogen and carbon capture, usage and storage projects in the 2025-26 financial year.
Cost of carbon
In addition to some big spending pledges, the first Labour Party budget for 14 years was not short on tax-raising measures. These included an adjustment to the energy profits levy (EPL). Introduced in May 2022, the EPL is applied to the profits of oil and gas companies operating in the United Kingdom and on the UK continental shelf, meaning it largely applies to industry in the North Sea. Reeves has hiked the EPL by three percentage points to 38%, removed a 29% investment allowance and extended the levy’s lifespan until March 31, 2030. It means the headline tax rate for oil and gas ventures in the North Sea is now 78%.
Reeves also confirmed the United Kingdom will introduce a carbon border adjustment mechanism (CBAM) from January 2027. The UK CBAM will put a levy on industrial goods from sectors with high carbon emissions. A similar mechanism is scheduled to go live in the European Union in 2026.
Electric vehicles
On vehicle electrification, the UK government will invest GBP 200 million in electric vehicle (EV) charge point infrastructure during 2025-26. Reeves has also committed GBP 120 million in 2025-26 to support the purchase of new electric vans through the government’s plug-in vehicle grant scheme, and to “support the manufacture of wheelchair-accessible EVs.”
Tax incentives for purchasing electric cars, such as reduced vehicle excise duty rates and reductions in the company car tax regimes, have also been maintained. A freeze on planned increases to the fuel duty applied to gasoline and diesel was also maintained.
Reaction
In a statement, Trevor Hutchings, chief executive of the UK Association for Renewable Energy and Clean Technology (REA), praised the budget as a “significant step forward.”
“The shift in fiscal rules to unlock investment signals a bold departure from previous approaches, opening pathways for new infrastructure and sustainable growth,” said Hutchings. “The confirmation of policies like the Carbon Border Adjustment Mechanism, the Warm Homes Plan, and GB Energy funding, along with continued support for electric vehicles and increased funding for the Boiler Upgrade Scheme, all represent positive leaps forward. Yet, there are missed opportunities to drive more ambitious outcomes, such as increasing the Fuel Duty rate and Carbon Floor Price, which could accelerate our transition to net zero.”
Brett Ryan, head of policy at Hydrogen UK, welcomed the confirmation of investment in commercial-scale hydrogen.
“The reaffirming of the multi-year investment into carbon capture and storage, along with funding for the 11 HAR1 projects, marks a much anticipated formal announcement on the government’s commitment to these clean energy sectors,” he said.
*This article was amended on Nov. 4, 2024 to correct the capacity threshold for nationally significant infrastructure projects in Wales.
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