What Rachel Reeves’ Speech Means for Energy in the UK

“I am determined to make Britain the best place in the world to invest,” said the UK’s Chancellor Rachel Reeves in a speech at Siemens Healthineers in Oxfordshire on 29 January 2025.

“That ambition demands action.”

Those actions include designating new Marine Protected Areas to enable the development of offshore wind technology, which she said can bring in up to £30m (US$37.2m) of investment.

She also announced plans to focus on net zero as an economic opportunity, publish a “refreshed” Carbon Budget Delivery Plan, support the development of a third runway at Heathrow Airport and invest in sustainable aviation fuel (SAF). 

“Investment in the right technology can help us deliver both our growth and our clean energy missions,” she said.

Economic growth and net zero

“There is no trade-off between economic growth and net zero,” she said.

“Quite the opposite. Net zero is the industrial opportunity of the 21st century, and Britain must lead the way.”

Plans to use net zero as a growth opportunity include using a modern industrial strategy, providing funding to “unlock investment” in sectors including automotives and aerospace. 

The strategy is set to be published in Spring 2025, but the government will be moving forward with it ahead of this.

Reeves said: “We are now investing 2.6% of GDP on average over the next five years, compared to 1.9% planned by the previous government, delivering an additional £100bn (US$124bn) of growth-enhancing capital spending which catalyses private sector investment in more housing, better transport links and clean energy.”

She also announced the designation of new Marine Protected Areas in areas like East Anglia and North Yorkshire where offshore wind farms like Hornsea, Tesside and the East Anglia Array are being developed and operated.

Beccy Speight, RSPB Chief Executive, said: “The rock of stability on which the Chancellor’s plans for growth depend has to be a healthy natural environment. Good, long term economic growth, thriving nature and net zero do not have to be at odds, yet some of today’s announcements put our climate targets at risk.

“Offshore wind is critical to addressing climate change and the announcement of new Marine Protected Areas is a positive step towards ensuring renewable energy doesn’t come at the cost of the marine environment.

"Progress at sea must go hand-in-hand with safeguarding and restoring nature on land."

Expanding aviation in the UK

The development of a third runway at Heathrow airport has been a point of contention in the UK for decades.

The airport’s second full-length runway was built in the 1940s.

Reeves said: “Heathrow is at the heart of the UK’s openness as a country.   

“It connects us to emerging markets all over the world, opening up new opportunities for growth. 

“Around three-quarters of all long-haul flights in the UK go from Heathrow, over 60% of UK air freight comes through Heathrow and about 15 million business travellers used Heathrow in 2023. 

“But for decades, its growth has been constrained.”

She announced the government’s support for development of a third runway and is inviting proposals to be brought forward.

Sadiq Khan, the Labour Mayor of London, said in a statement: “I remain opposed to a new runway at Heathrow airport because of the severe impact it will have on noise, air pollution and meeting our climate change targets.

“I will scrutinise carefully any new proposals that now come forward from Heathrow, including the impact it will have on people living in the area and the huge knock-on effects for our transport infrastructure.

“Despite the progress that’s been made in the aviation sector to make it more sustainable, I’m simply not convinced that you can have hundreds of thousands of additional flights at Heathrow every year without a hugely damaging impact on our environment.”

In her speech, Reeves said: “Heathrow themselves are clear that their proposal for expansion will meet strict rules on noise, air quality and carbon emissions and we are already making great strides in transitioning to cleaner and greener aviation.”

Sustainable aviation fuel

There are many technologies in development that hold promise for low or no carbon emissions aviation, but they are far from being ready.

SAF is capable of cutting aviation emissions dramatically and can be used in most existing aircraft, avoiding the cost and time investments that come with new technology. 

Neste’s SAF, for example, is capable of reducing emissions up to 80% compared to traditional jet fuel.

The UK government has been vocal in its support of SAF development, as have many other countries, and Rachel emphasised its support in relation to environmental issues with Heathrow’s potential expansion. 

She also announced an investment of £63m (US$78.2m) into the Advanced Fuels Fund and a plan to deliver a Revenue Certainty Mechanism to encourage investment into UK SAF. 

“These measures will encourage more investors to back production in the UK, bringing good, high-skilled jobs to areas like Teesside, demonstrating that investment in the right technology can help us deliver both our growth and our clean energy missions,” she explained.

However, this has not quelled all concerns with a third Heathrow runway.

John McDonnell, Labour’s MP for Hayes and Harlington, wrote on social media: “This is such a huge political, economic and especially environmental mistake that sadly I fear it will inflict an irreparable scale of damage on the government.”

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