The UK Government’s Spending Review 2025 sets out major commitments across energy, infrastructure, transport, and housing, framing the path toward net zero, economic growth, and national resilience. While much of the focus has been on supply-side investment, the Energy Demand Research Centre (EDRC) highlights the vital role of energy demand reduction. This blog explores how the review’s announcements can support lower energy use across homes, schools, transport, and industry, delivering long-term savings, resilience, and climate benefits.
First, the UK Government has highlighted that energy security is core to their national security plans. It highlights Sizewell C, small modular reactors, and Carbon Capture and Storage, as relevant investments. However, EDRC has highlighted that energy demand reduction is also a highly relevant contributor to energy security.
On public services, the schools budget has included £2.4bn per year for four years, in the School Rebuilding Programme, to rebuild over 500 schools. Quality indoor and outdoor environment are so important for learning. Rebuilding, in a way that puts indoor comfort first, can deliver buildings which are lower in energy demand. This also delivers lower energy bills for schools, freeing up revenue for reinvestment in student learning excellence, a win-win for energy demand reduction.
It is highly relevant to the energy sector that the Comprehensive Spending Review has recognised the need for investment in critical infrastructure and associated supply chains, with £27.8bn in the National Wealth Fund and £300m in Great British Energy. It is vital that these investments include demands side technologies and not just investment on the supply side.
EDRC welcomes the £616m for Active Travel England, to support development of walking and cycling infrastructure. This is a relatively small amount of investment, compared for example to investment of £1.4bn in electric vehicle support and £400m for vehicle charging infrastructure, and £2.2bn just for London through Transport for London. However, there is potential for some of the £2.3bn local transport grant awards to be spent on bus lanes and cycle ways, which can reduce car transportation and associated congestion and air pollution. The extension of the £3 national cap on bus fares, to March 2027, is also a positive measure to support reduction in car use.
Lastly, energy demand reduction in our homes can lead to co-benefits for health, affordability, security of energy, and reduced overall energy system size. EDRC welcomes the Warm Homes Plan investment of £13.2bn, and the £39bn 10-year affordable homes programme. There is also a £1.5bn investment in rapid improvement to military accommodation. The means of delivering near zero energy homes is in our grasp, and it is vital that these investments deliver deep reduction in energy use. This delivers affordable homes through near zero energy bills. It ensures we do it right the first time, and do not have to go back and ‘fix’ these properties again in the run up to the 2050 net zero target. Our research has shown that investment in energy efficiency, rather than direct bill support, for the domestic sector can lead to more sustained economic benefits. Therefore, this investment in quality, affordable, near zero energy homes has strong potential to deliver sustainable economic growth.
