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Budget offers billions to assist renewable and low carbon energy


Chancellor Alistair Darling has announced hundreds of millions of pounds of funding and support for renewable and low carbon energy projects in the UK, potentially freeing up £10.4 billion of new investment.

As part of his Budget statement today, he said renewable and other energy projects stand to benefit from £4 billion of new capital from the European Investment Bank.

Offshore wind projects are set to gain £525 million through a rise in the Renewables Obligation banding for the next two years.

Mr Darling said: "On the back of the discovery of oil and gas in the North Sea, we became a world leader in every aspect of oil technology and the industry. I am determined that we will replicate this success across the renewable energy and low carbon sectors."

The Chancellor announced within his Budget statement that combined heat and power plants would be made exempt from the Climate Change Levy from 2013 - which would "bring forward £2.5 billion of new investment" in CHP projects.

Mr Darling also said £435 million of additional funding would go towards energy efficiency measures for households and businesses. Some £70 million of this funding will be for decentralised small-scale and community low-carbon energy.

He said green technology would be one of the "growth opportunities" for the UK economy, with the potential for thousands of high-tech businesses to be created. The Budget offers £405 million for low carbon energy and "advanced green manufacturing" in Britain.

"In particular, this will help us strengthen the supply chain right across these sectors, and build on the expertise we already have in this country," said Mr Darling.


Low Carbon Buildings Programme

The Low Carbon Buildings Programme will be given a further £45 million to fund small-scale renewable electricity and heat schemes, according to today's Budget.

The Treasury says this will help 13,000 installations, and prepare the renewable energy supply chain for the renewable energy feed-in tariffs being brought in during 2010 and 2011.

A further £25 million will go towards low-carbon community heating schemes, which will be available for 10 communities.

Related link: LCBP

Offshore Wind

In particular, Mr Darling pointed to the need to boost the economics of offshore wind projects that have ground to a halt as a result of the credit crunch. He said £525 million of new funding would be provided to the offshore wind industry from the Renewables Obligation until 2011.

This is being carried out by raising the subsidy levels for offshore wind from 1.5 ROCs per MWh to 2 ROCs per MWh for new orders in 2009/10, and then 1.75 ROCs per MWh for orders placed in 2010/11.  

"We must build on Britain's status as the world leader in offshore wind power generation," he said. 

"The credit squeeze is holding back major offshore wind projects. I want to lift the barriers - through £525m of new financial support over the next two years for off-shore wind, funded through the renewables obligation. The potential is enormous."

The government expects the offshore wind funding to free up £9 billion of investment. "I am confident that this will lead to major projects getting the go-ahead quickly, providing enough electricity to meet the needs of up to three million households," said the Chancellor. 


Presenting the "world's first Carbon Budget" as part of his statement to the House of Commons this afternoon, Mr Darling said his government would cut the UK's emissions by 34% before 2020.

He highlighted carbon capture and storage technology as being "vital" to ensure the UK can produce power from fossil fuels "without damaging the environment".

The Budget announces a new funding mechanism to support four carbon capture and storage demonstration projects, as well as a £90 million fund for detailed preparatory studies.

Previously, the government had said it would only support one CCS project, for which there are currently three bidders.

The four projects that will now be supported will include post-combustion and pre-combustion coal carbon capture technologies. Some £60 million of the £90 million on offer for preparatory design and engineering studies will be made available from UK transport budgets, since the government is currently seeking to support electric-powered vehicle use.

"The new generation of power plants could be even more efficient by using the heat produced in the generation of power." Alistair Darling


The Chancellor also spoke this afternoon of encouraging the use of combined heat and power plants, which he said would be exempt from the Climate Change Levy from 2013 until 2023, freeing up £2.5 billion of investment.

Mr Darling said: "The new generation of power plants could be even more efficient by using the heat produced in the generation of power."

The Budget report suggests 3GW of CHP capacity could result from the extension of the Levy exemption, which is still subject to EU approval under State Aid rules.

By 2020, the government said 7GW of CHP capacity could be in place, reducing carbon dioxide emissions by 3.2 million tonnes a year.

The Climate Change Levy itself will remain at current levels in 2010/11, the Treasury said today.

The Landfill Tax, a levy on waste going to landfill, which is seen as a big driver for energy-from-waste projects, continues its annual £8 per tonne increase up to 2013, the Budget confirmed. The Tax has been £40 per tonne since April 1, 2009.

Energy-from-waste projects using anaerobic digestion will be able to bid for £10 milln of new grnats in 2009/10, the Budget said today. Energy-from-waste infrastructure in the UK will also benefit from a further £2 billion of Private Finance Initiative credits planned.


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