Sage Sunak has allowed homeowners to go ahead with cheaper taxpayer-backed loans to help them install heat pumps, solar panels and other energy efficiency systems to combat rising energy bills.
The Chancellor has asked the government to use the new infrastructure to address some of the cost-of-life crises of its 22 22 billion investment fund.
The move is expected to help high-street banks lend at knockdown interest rates for energy efficiency projects that will pay for themselves by reducing utility bills.
Ministers hope the plan will launch thousands of new projects as homeowners look for ways to reduce the impact of fuel costs.
The directive from Sunak comes as Boris Johnson finalizes plans to increase energy security by investing in new nuclear power plants and increasing solar and wind power. Yesterday, the Prime Minister told the leaders of the nuclear industry that he wanted to get a quarter of the UK’s energy from nuclear sources by 2050.
Total electricity demand is projected to double by then, driven by electric vehicles and electric heating. According to the Climate Change Committee, this means that annual demand will now increase from about 300 terawatt-hours per year to more than 600 terawatt-hours.
One-fourth of its production from nuclear power will require six plants the size of Hinkley Point C – a huge project under construction at Somerset that is expected to generate about 25 terawatt-hours per year, enough to supply about 6 million homes.
Johnson discusses the energy industry’s demands for pension funds to make it easier to invest in long-term projects and how to speed up the planning process.
He is expected to focus on energy efficiency as part of a government strategy that will take on a new role for the bank, which was established last year to fully support Treasury-owned and strategic investments.
Ministers have previously told the bank that its funds should not be used for “mainly social” development such as housing. But in a letter to the chief executive, John Flint, Sunak said he wanted the bank to “prioritize opportunities consistent with the government’s focus on energy security.”
“It is important that we take every possible step to improve the resilience of our energy, protecting us from future shocks and global market volatility,” he wrote. “Opportunities include projects that support energy efficiency, including retrofit and / or heating decarbonization of existing homes and buildings. [for funding].
“This reflects the strategic importance of the Net Zero Transition, as well as the urgent need to improve the energy efficiency of our buildings in the face of high energy costs.”
Sunak’s move follows a call from Business Secretary Quasi Quarteng for a more active role in supporting the bank’s energy efficiency.
The move means that high street banks should be able to lend significantly below normal high street interest rates. This is because – like a loan for a business during an epidemic – the risk of default is borne by the taxpayer rather than the lending bank.
Mike Thornton, chief executive of the Energy Saving Trust, said: “It is good to see a clear signal from the top of the government that it is committed to supporting energy efficiency by restoring homes and scaling the decontamination of home heating.”