Budget prioritises energy affordability, but leaves longer-term transition questions unanswered
Energy transition Residential research
The Budget’s focus on bringing down energy costs for households is welcome and broadly maintains short-term incentives for the energy transition. However, LCP Delta warns that decisions on future funding and market design leave important questions about how the UK will deliver its longer-term net zero ambitions.
The Budget confirms that heat pumps remain a government priority for now, but signals a shift in how ministers plan to support the market. With Boiler Upgrade Scheme funding remaining at £400m for 2027/28 rather than increasing as originally intended, this places greater emphasis on low-cost loans and other measures to drive future growth. Without further action, we expect the number of installations supported to remain relatively flat and miss government targets.
This is clearly an affordability-first Budget, which is important given current market conditions. Our analysis shows that well-targeted renewable investment, such as the upcoming CfD AR8, which could save customers more than £11bn between 2027 and 2050, can lower bills and reduce exposure to international gas markets. However, the challenge now is ensuring today's bill reductions are supported by the investment and certainty needed to sustain those benefits. We hope the 2027 Spending Review will provide a coherent energy investment framework as part of the new Cost Control Framework that balances affordability with the long-term energy transition.
Sam Hollister Head of UK Market Strategy at LCP Delta
