31 Oct Budget 2024: Opportunities and Challenges for Aberdeen’s Energy Sector
The Budget announcement focused on advancing economic stability and driving a renewable energy transition, with a significant impact on Aberdeen’s energy sector.
Chancellor Rachel Reeves’ commitment to establishing Aberdeen as the base for Great British Energy (GBE) was evident, with £25 million allocated for the set-up and a further £100 allocated for in 2025-26 for clean energy projects.
This funding will support hydrogen production, CCS (carbon capture and storage) projects and the decarbonisation drive.
Alongside GBE, an additional £500 million has been earmarked for hydrogen infrastructure, with £1 billion directed to CCS projects, underlining a commitment to attracting private capital for clean energy transition initiatives.
Changes to the Energy Profits Levy (EPL) were previously announced. The levy now stands at a headline rate of 78% and has been extended to 2030, with the previously available 29% investment allowance removed. This adjustment presents challenges, especially as the independent Office for Budget Responsibility (OBR) forecasts a 26% reduction in capital expenditure for offshore energy. However, retaining the 100% first-year capital allowance and a 66% decarbonisation allowance provides continued support for businesses investing in sustainable infrastructure.
The Energy Security Investment Mechanism will also phase out the EPL if oil and gas prices fall, adding a measure of stability for future planning.
This budget establishes foundational support for Aberdeen’s energy expertise, creating both immediate and long-term opportunities to drive a sustainable energy transition.
While investments in hydrogen, carbon capture and storage (CCS), and green industry incentives offer promising benefits, a clear, structured roadmap for oil and gas is essential to ensure a just transition.
The shift to renewables must carefully balance the current operational needs of the sector with sustainable growth, fostering job security and enhancing energy resilience.
By encouraging growth in emerging sectors while preserving skilled workforces and vital infrastructure, the North-east can strengthen its role in a diverse energy mix.
By Simon Cowie, Managing Partner, Infinity Partnership