Delivered on 28 October by Chancellor John Healey, the Budget included new investment mechanisms and measures to accelerate energy infrastructure development. While broadly positive, the response from commentators in the environmental sphere raised concerns about the implications of changes to existing support schemes, investment incentives and environmental protections.
On energy, one of the Budget’s most significant announcements was the creation of a £2 billion fund for renewable and low-carbon energy infrastructure. Known as the Energy Wealth Fund, it will operate within the National Wealth Fund, with further funding expected to be linked to revenues from North Sea oil and gas.
The Government is also changing its approach to procuring new electricity generation. Future support will prioritise projects that can connect to the grid, contribute to system needs and help reduce bills, rather than simply expanding generating capacity. The forthcoming eighth Contracts for Difference (CfD) allocation round is expected to reflect these priorities.
A separate proposal would move some existing renewable generators from arrangements under the Renewables Obligation to fixed-price wholesale contracts. The intention is to reduce consumers’ exposure to periods when high gas prices drive up wholesale electricity costs.
One reservation apparent in the renewables sphere concerned investor confidence.
Gemma Grimes, director of policy and delivery at Solar Energy UK, warned that the fixed-price scheme could undermine the objective of cheaper electricity if it weakened confidence in renewable energy investment.
“The devil will be in the detail of this scheme,” she said. “While it reflects understandable pressure to lower bills, it could ultimately prove damaging to that objective by harming confidence in investing in cheap, clean, homegrown power.”
Sonya Bedford, a partner at law firm Spencer West, similarly cautioned that new contract arrangements would need to respect existing financing agreements and power purchase agreements.
The Government’s plans for Great British Grid are intended to accelerate electricity network development and address delays that have prevented projects from connecting. But faster connections will need to be matched by investment certainty, Bedford suggested, particularly for smaller and community energy schemes.
Industrial energy costs
High electricity prices remain a significant concern for manufacturers and energy-intensive industries, including companies operating water treatment, recycling and waste processing facilities.
The Budget confirms that the British Industrial Competitiveness Scheme will provide electricity discounts of approximately 20–25% to around 10,000 eligible manufacturing businesses from April 2027, with retrospective support for 2026–27.
The Government will also introduce a Cost Control Framework in 2027 to oversee the policy costs incorporated into energy bills. Until then, new policy costs will generally be restricted to those that reduce bills or are essential for security of supply.
However, the electrotechnical manufacturing association BEAMA argued that the industrial support scheme should cover more businesses.
“Many manufacturers of electrical products will now continue to pay policy costs on their electricity bills that other manufacturers will be exempt from,” said its chief executive, Yselkla Farmer.
There are also questions about whether subsidising electricity costs will encourage businesses to make the investments needed for longer-term decarbonisation.
Miles Thomas, chief commercial officer at AMPYR Distributed Energy argued that greater attention should be paid to on-site generation, including projects financed through power purchase agreements.
Such arrangements could allow businesses to reduce their exposure to wholesale electricity prices without relying on continuing public subsidies, he suggested.
Biomethane and waste treatment
The Budget appeared to expose differences in the Government’s approach to low-carbon gaseous fuels, with hydrogen receiving new financial support while the anaerobic digestion industry continues to face uncertainty over existing incentives.
The Government has allocated £27 million of Exchequer funding to the first Hydrogen Allocation Round and abandoned the proposed Gas Shipper Obligation, which would have recovered hydrogen support costs through gas bills.
The Anaerobic Digestion and Bioresources Association (ADBA) welcomed the decision to scrap the levy but criticised the continuing freeze on the funding cap for the Green Gas Support Scheme.
According to ADBA, more than a dozen biomethane plants are ready for construction but cannot proceed without a decision on the scheme’s funding.
Chris Huhne, chair of ADBA, said: “The Chancellor is right that Britain must break its exposure to volatile global gas prices, but missed a trick on home-grown green gas made on British farms and in British towns.”
He continued: “Today the government found money from general taxation for hydrogen, yet left biomethane, which is a proven technology heating homes right now, waiting on a single decision.
“More than a dozen plants are ready to build with far better value for money than hydrogen. Lift the cap now and they will be producing gas for British homes, not leaving us reliant on imported LNG.”
The Government’s intention to limit new levies on energy bills could make it harder to increase support for biomethane production. However, ADBA argues that an exception for measures essential to energy security could provide a way to unlock funding for new plants.
Elsewhere in the waste sector, the Budget announced changes to Landfill Tax, increased the maximum tax credit available through the Landfill Communities Fund, and provided funding to support the clearance of illegal waste sites. It also introduced plans for independent certification of recycled-content claims under the Plastic Packaging Tax from 2030.
Dr Benedikt Engel, chief executive of industrial AI company MatAlytics, suggested that improved monitoring and asset management could help energy-from-waste operators assess investments in carbon capture while maintaining plant performance. Such approaches may become increasingly relevant as operators face pressure to reconcile emissions reduction with operating costs.
Water demand and data centres
Although the Budget contains relatively few measures directed specifically at water and wastewater services, the Government’s proposals for data centres have potentially important implications for water resources and infrastructure planning.
The new Data Centre Covenant establishes environmental expectations for strategically important developments seeking enhanced government support, including preferential access to electricity network capacity.
These include minimising water consumption, publishing annual energy and water consumption figures, protecting nature and recovering waste heat for use in nearby buildings wherever practical.
The proposals reflect growing concern about the resource demands of data centres, particularly as investment in AI increases electricity consumption and, in some facilities, cooling-water requirements.
Colin Rees, co-lead of consultancy at building performance specialist IES, welcomed the commitments but questioned whether reporting alone would be sufficient.
“Publishing consumption figures alone does not establish whether a facility is efficient. Government should set measurable performance requirements and specify consequences for failure,” he said.
Rees also called for independently verified efficiency standards as a condition of preferential grid access, alongside emissions limits for any temporary on-site generation permitted while developments await grid connections.
For water utilities, the expansion of data centre capacity could increase the importance of local water availability, demand forecasting and the choice of cooling technologies. Opportunities may also arise for water reuse and heat recovery, although the Covenant does not itself establish a dedicated funding programme for these applications.
More broadly, the Budget reiterates the Government’s intention to exercise greater strategic control over essential infrastructure, including water. However, it offers limited new detail on water sector investment or the delivery of wastewater improvements.
Home energy efficiency faces cuts
The Budget retains support for heat pump installations through the Boiler Upgrade Scheme, with funding of £400 million in 2027–28 and subsequent increases broadly in line with inflation.
There is also an additional £100 million for solar and battery installations in social housing, alongside further funding for home energy improvements.
However, the Department for Energy Security and Net Zero is reducing capital grant funding for the Warm Homes Plan by £1 billion as part of a wider reprioritisation of spending towards defence. Great British Energy’s funding is also being reduced by £200 million, leaving £8.3 billion over the spending review period.
Another contentious decision is the withdrawal of the zero VAT rate on energy-saving materials, which will be replaced by a 5% rate from April 2027.
Chris Hewett, chief executive of Solar Energy UK, argued that the change would discourage investment in domestic renewable technologies.
“Removing the VAT exemption is inconsistent with the Government’s intention for more people to enjoy the benefits of home solar and battery systems,” he said.
The Government has also extended the temporary zero VAT rate on household electricity bills until July 2027 and announced a £100 Household Energy Payment for eligible households in England.
The tension between short-term relief from energy bills and investment in longer-term efficiency improvements emerged as a recurring theme in industry responses.
Improving insulation and heating efficiency would deliver more lasting reductions in household energy expenditure than repeated short-term subsidies. Yet the apparent prioritisation of immediate bill relief over longer-term improvements has again prompted frustration from many.
Biodiversity protections relaxed
Another contentious measure was the Budget’s relaxation of biodiversity net gain (BNG) requirements for certain developments.
The Government plans to exempt residential developments on brownfield sites of up to 1.5 hectares in England from BNG requirements, arguing that this will reduce development costs and accelerate housebuilding.
The decision could have implications for habitat creation and the emerging market in biodiversity units, which developers can purchase to meet their obligations when improvements cannot be delivered entirely on-site.
Penny Simpson, head of environmental law and the natural capital legal team at Freeths, warned that the exemption could weaken private investment in nature recovery.
“Brownfield sites can be rich in biodiversity, and exempting further developments from biodiversity net gain requirements risks weakening demand for biodiversity units,” she said.
The Wildlife Trusts also criticised the change, highlighting the potential ecological value of brownfield sites and their contribution to urban green space, flood management and climate resilience.
Dom Higgins, the organisation’s head of health and education, said the exemption could remove opportunities to introduce trees, ponds and other habitats into urban communities.
Investment and infrastructure delivery
An upturn in funding prospects for infrastructure projects was one positive to take away from the Chancellor’s speech.
The Government is increasing the capital available to the National Wealth Fund and British Business Bank by £20.4 billion, including the £2 billion allocation to the Energy Wealth Fund.
It is also strengthening the role of local and regional authorities in economic development and infrastructure investment.
Milda Manomaityte, chief executive of the Association for Consultancy and Engineering, welcomed the emphasis on fiscal devolution but stressed that long-term investment certainty would be essential.
“The infrastructure sector needs a stable, fully funded pipeline, clarity on the private investment models government expects us to rely on, and certainty that these commitments will survive the next fiscal event,” she said.
Similar concerns were expressed by planning and environmental consultancy LUC, which argued that local authorities would need sufficient expertise and resources to translate new powers into well-designed development.
The overall direction of travel seemed to be towards a more selective approach to public support, prioritising projects on the basis of affordability and likely investment returns, and which might be capable of progressing quickly.
