Budget Byte: Energy
Grid Connections
In the supporting documents, Government published its response to the DESNZ consultation in Spring on "Accelerating electricity network connections for strategic demand". This relates to the “Plan" pillar of demand connections reform – a strand of work focused on ensuring strategically important demand projects are first identified and then prioritised for electricity grid connection. Government also published a "Data Centre Covenant" which sets out the high-level minimum requirements for projects to be considered "strategic".
Energy Costs
The focus on energy costs was largely concentrated on households rather than businesses, as demonstrated in the VAT extension and £100 support for properties in certain council tax bands. Targeted support for 10,000 frontier manufacturing firms through the British Industrial Competitiveness Scheme (BICS) was confirmed, but this is neither new nor comprehensive. Digital infrastructure, for example, remains ineligible.
The (somewhat) good:
No new policy costs will be put on bills until a comprehensive Cost Control Framework is in place at the Spending Review in 2027. This was the main announcement on business energy costs, with the Framework including households too. Though potentially a positive mechanism, careful policy development is needed to ensure it paves the way for levies to be moved to taxation and does not fail like the previous iterations. This Framework is also not new: it was originally announced at the previous Autumn Budget.
The main rate of the Climate Change Levy (CCL) on electricity will be frozen from 1 April 2028. Whilst providing small relief to businesses, it will not make a significant difference; furthermore, it will not be implemented for another 18 months.
Government rather than billpayers will fund the Gas Shipper Obligation. Again, a move with negligible impact but the right approach, nonetheless.
There are no immediate plans to take forward the proposal to auction spare grid connection capacity. We have strongly urged against auctions, which introduce substantial commercial risk and could lead to a situation where bids from speculative projects end up displacing credible projects that demonstrate genuine technical readiness and strategic importance. However, it is "under further consideration", so not ruled out altogether; we believe it should be.
Prioritisation measures will be introduced for strategic demand. Through the Connections Accelerator Service (CAS), certain strategic demand projects will potentially benefit from faster connections. For data centres, only those that meet the obligations of the new "Data Centre Covenant" will be considered. Projects will then be assessed against agreed scoring criteria for the CAS that consider economic, social, and strategic factors. Whilst laudable in theory, neither the definition of strategic in the Covenant nor the criteria for the CAS have been published.
The bad
There will be a plan to cap data centre development in line with regional infrastructure targets. Despite techUK's warnings of the impact this will have on investment, Government has confirmed it will be aligning post-2030 data centre connections to regional infrastructure caps, which will act as a limit on connection volumes. Any projects above the limit will be "deprioritised". That said, the details have not yet been worked out yet and there may still be potential to support development in constrained areas - for example projects paying for/building their own infrastructure.
No substantive action on business energy bills. As above, the announcements on the CCL and Gas Shipper Obligation will have marginal impact and the Cost Control Framework was introduced at the last Budget, so little progress appears to have been made over the past year. Government announced in 2025 that 75% of one levy – Renewables Obligation – will be moved to taxation for households but no such measure is in place for industry (see techUK's levy campaign here). Furthermore, just a week after the Autumn Budget, there appears to be tentative plans in the Energy Independence Bill for a new Hydrogen to Power levy, which could fly in the face of Government's promise to ensure no new policy costs are added to bills.
Next steps for techUK
Work with DBIST as it develops a definition of and criteria for "strategic" data centre projects.
Make the case for the data centre plan to include provisions for strategic projects to overcome and address local network constraints e.g. paying for reinforcements themselves.
Co-develop proposals with industry and members on the Cost Control Framework to
