What the 2025 UK Budget Means for Clean Energy

Most businesses looking at the 2025 UK Budget see the headline: average household energy bills down by around £134 a year. The more important story is underneath that number: the UK is quietly rewiring how it pays for clean energy, transport and infrastructure.

This matters because those choices decide how fast green technology scales, who pays for it, and where the real opportunities sit for innovators and investors over the rest of the decade.

In this post, I’ll walk through the key climate and energy moves in the 2025 Budget and what they actually mean if you care about clean energy, electric vehicles, and the wider green technology transition.

1. Energy bills: cheaper electricity, different funding model

The 2025 Budget cuts a typical dual-fuel household bill by around £134 per year from April 2026 to April 2029. But the mechanism is more important than the saving.

Two big shifts drive the change:

• Scrapping the Energy Company Obligation (ECO) – removing about £63/year from the average bill
• Moving three‑quarters of the Renewables Obligation (RO) cost onto general taxation – cutting bills by another £70/year

Put simply: instead of loading the costs of energy efficiency and renewables onto electricity bills, the Treasury starts paying more of the tab directly.

What this means for green technology

Here’s the thing about this move: it makes electricity cheaper relative to gas. That’s exactly what the UK’s Climate Change Committee has been asking for, because almost every serious decarbonisation strategy boils down to “electrify everything and clean up the grid”.

Carbon Brief’s analysis suggests the change cuts domestic electricity unit prices by roughly 4p/kWh – about a 16% drop – from around 28p to about 23p per kWh under the 2026 price cap.

For anyone working on green technology, that has real effects:

• Heat pumps become more attractive vs gas boilers as running costs fall.
• Electric vehicles look even cheaper to operate, even with a new per‑mile tax (more on that shortly).
• Electric process heat and electrified industrial equipment become more competitive with gas-fired alternatives.

The government has also promised a broader “warm homes plan” to go further in “improving the price of electricity relative to gas”. If that delivers, it nudges the whole economy toward clean electrification.

ECO ends, but public funding steps in

Ending ECO sounds bad at first glance – it funded energy efficiency measures in fuel‑poor homes via levies on bills. But ECO had serious design and quality problems, and the National Audit Office was blunt about it.

Instead of abandoning efficiency, the government is putting an extra £1.5bn into the warm homes plan to take over from ECO. The old ECO pot was around £1.7bn, but a centralised, area‑based public scheme can be:

• More targeted – focusing on whole‑street or whole‑estate retrofits
• Cheaper to administer – less fragmented than individual supplier obligations
• Higher quality – with clearer standards and accountability

If you’re in the retrofit, heat pump, or smart home technology space, this is a signal: expect more publicly funded, area‑based upgrade programmes rather than fragmented supplier schemes. That’s an opportunity for:

• Scalable retrofit platforms
• Digital tools to plan and audit area‑wide upgrades
• AI‑driven energy modelling for local authorities

Meanwhile, electricity‑intensive industries get more support too. From 2027, the British Industrial Competitiveness Scheme aims to cut electricity costs for eligible businesses by £35–40/MWh, helping keep heavy industry in the UK while it decarbonises.

2. Electric vehicles: pay‑per‑mile tax plus new support

The most controversial measure for green tech is the new electric vehicle excise duty (eVED) – a pay‑per‑mile tax on EVs from April 2028.

• Battery EVs: 3p per mile
• Plug‑in hybrids: 1.5p per mile

The average battery EV driver is expected to pay around £240 per year. That’s still only about half the effective fuel duty per mile paid by petrol and diesel drivers.

Will this slow the EV transition?

The Office for Budget Responsibility thinks eVED will reduce EV demand, estimating around 440,000 fewer electric car sales across the forecast period compared with its previous outlook.

But the Budget also layers in new support that recovers around 320,000 of those lost sales. The net effect is a slower, but still strong, EV trajectory.

Here’s the trade‑off:

• The government needs to replace falling fuel duty as combustion engines phase out.
• It also doesn’t want to kill EV demand just as the market is maturing.

So we end up with a hybrid model: EVs pay into the system, but still remain meaningfully cheaper to run than petrol or diesel. Analysis from the Energy and Climate Intelligence Unit suggests EV drivers will still be about £1,000/year better off on running costs, even after the 3p per mile charge.

The carrot: grants, tax tweaks and infrastructure

To offset the stick of eVED, the Budget beefs up the EV support package:

• Electric car grant funding increases by £1.3bn and runs to 2029–30
• The “expensive car supplement” threshold rises from £40,000 to £50,000 from April 2026, making more mid‑range EVs tax‑efficient
• Benefit‑in‑kind (BIK) increases for EVs are delayed to 2030, keeping company EVs attractive
• The Drive35 R&D programme gets another £1.5bn through to 2035, taking total funding to £4bn over ten years
• An extra £100m for EV charging infrastructure, on top of earlier commitments
• 10‑year, 100% business rates relief for eligible EV chargepoints, plus support for local authority roll‑outs

For EV ecosystem players – from OEMs to charge‑point operators and fleet platforms – the signal is clear:

The UK is moving towards a user‑pays model for road use, but policy is still firmly pro‑EV.

Where AI and green tech fit in

This is a classic place where digital and AI tools matter more than people realise.

Some practical plays I’ve seen work in similar contexts:

• Smart charging platforms that optimise when and where EVs charge to minimise cost and grid impact – especially powerful as electricity prices fall vs gas.
• Fleet optimisation using AI, factoring in eVED, energy tariffs, route patterns and vehicle health to minimise total cost of ownership.
• Data‑driven public charging planning – using usage data, demographics and grid constraints to tell councils and investors where to put chargers and what power levels they actually need.

As road pricing evolves, the winners will be the companies that can translate complex policy into simple, cheaper everyday decisions for drivers and fleet managers.

3. Fuel duty: the long freeze finally starts to thaw

For petrol and diesel, the Budget keeps one foot on the brake and one on the accelerator.

• The fuel duty freeze continues until September 2026.
• The temporary 5p cut from 2022 will be reversed gradually by March 2027.
• The planned inflation‑linked rise for 2026‑27 is cancelled.
• From April 2027, fuel duty goes back to rising with inflation.

Sixteen years of freezes and cuts will have cost the Treasury around £120bn by 2026‑27 compared to a simple inflation‑linked path, and pushed UK transport emissions higher by making driving cheaper.

Politically, fuel duty rises are toxic. But the direction now is pretty clear:

• Combustion fuel gets steadily more expensive.
• Electricity becomes relatively cheaper.
• Road funding gradually shifts from fuel duty to per‑mile charging.

For green technology, that’s the world you should be designing for – one where distance and congestion are taxed, not just fuel, and where clean alternatives get a structural advantage.

4. North Sea oil and gas: slower exit, small loopholes

On the fossil side, the government has published its North Sea future plan. The headline: no new oil and gas licences, but a new mechanism called “transitional energy certificates” that lets companies drill for extra oil and gas on or near existing fields, without fresh exploration licences.

Independent analysis suggests the volume unlocked this way is relatively small compared to big new fields like Rosebank. Think tens of millions of barrels of oil equivalent, not hundreds.

The more important changes are structural:

• The North Sea Transition Authority’s objectives are being rewritten. Instead of simply “maximising economic recovery” of oil and gas, it must now balance three things:
  • Societal economic value
  • Net‑zero alignment
  • Long‑term benefits for workers and supply chains
• A new North Sea jobs service will support workers moving into clean energy, defence, and advanced manufacturing.

For green tech companies, particularly in offshore wind, grid, and marine innovation, this is good news. You’re getting formal recognition that the North Sea’s future is clean energy, not endless drilling.

It also means skills and supply chains in the basin – fabrication yards, subsea engineering, marine operations – will increasingly look for projects in floating wind, grid interconnectors, carbon capture, and similar fields.

If you can offer:

• Retraining platforms for oil and gas workers into clean tech roles
• Project marketplaces matching North Sea suppliers to renewable projects
• Digital twins and AI tools to plan multi‑use offshore infrastructure

…you’re aligned with where policy wants to go.

5. Nuclear, green finance, critical minerals and rail

The Budget’s section on “investing in energy security” is dominated by nuclear power and green finance.

Nuclear and consumer bills

The government is committing £14.2bn to Sizewell C, supported by a regulated asset base (RAB) model. That means consumers start paying for the project via their bills while it’s being built.

The Office for Budget Responsibility expects RAB‑linked receipts of £0.7bn in 2026‑27, rising to £1.4bn by 2030‑31.

You can argue about whether nuclear is the right bet, but the direction is locked in: nuclear is now officially treated as a green investment in the UK’s updated green financing framework.

For the broader green technology sector, that matters for two reasons:

• Green capital pools – green bonds, ESG‑mandated funds, etc. – can now flow into nuclear alongside renewables, efficiency and other projects.
• The UK is signalling it wants a full‑spectrum clean power mix – renewables plus firm low‑carbon capacity.

Critical minerals and regional green industry

The Budget also reinforces the UK’s critical minerals strategy and industrial policy:

• £14.5m for a low‑carbon industrial centre in Grangemouth
• Support for critical minerals, renewable energy and marine innovation in Cornwall, including lithium, tin and tungsten

If you’re building AI and data tools for responsible mining, supply‑chain traceability or low‑carbon industrial clusters, this is the backdrop you’ll be working in.

Rail fares and modal shift

A smaller but useful move: a one‑year freeze on rail fares, with some commuters saving over £300/year.

Is that enough to transform transport emissions? Of course not. But it reinforces a broader pattern:

• Cars get taxed per mile.
• Fuel duty begins to rise again.
• Rail is held down in price.

For mobility‑as‑a‑service platforms, journey‑planning apps and corporate travel tools, there’s a clear logic: steer users towards rail and EVs, away from petrol‑heavy travel.

How to respond if you’re building or buying green technology

Taking all these measures together, the UK is edging toward a clearer economic story:

Use less fossil fuel, more electricity, and pay for infrastructure based on use, not just at the pump.

If you’re a business leader, investor or technologist, here are concrete moves that fit this direction:

1. Electrify where you can, sooner than you planned.

   • Falling electricity unit costs vs gas strengthen the business case for heat pumps, electric boilers and electrified industrial kit.
   • Factor in future fuel duty rises and EV per‑mile charges, not just today’s prices, when modelling TCO.

2. Design for a road‑pricing world.

   • Assume that by the 2030s, some form of usage‑based charging will be normal.
   • Build mobility products and fleet solutions that optimise around distance, time and congestion, not just fuel type.

3. Target public and quasi‑public programmes.

   • Warm homes funding, EV grants, industrial competitiveness schemes, and regional clean‑industry centres all need digital tools to plan, deliver and measure impact.
   • If you can prove cost savings or CO₂ reductions clearly, you’ll be first in line.

4. Lean into North Sea and nuclear transitions.

   • Offer reskilling, optimisation and data products that help incumbents move into clean energy.
   • Treat nuclear’s inclusion in green finance as a sign that “green” capital is widening, not shrinking.

The 2025 Budget isn’t perfect. It still props up fossil fuels via ongoing fuel duty freezes and allows new North Sea extraction via a backdoor. But the underlying direction is now much harder to miss: a cheaper, more electrified energy system, paid for more through tax and road pricing than through opaque levies on power bills.

If you align your green technology strategy with that reality – cheaper electricity, pricier fossil fuels, and smarter, usage‑based infrastructure funding – you’ll be on the right side of both policy and economics over the rest of this decade.