British renewable energy chiefs ‘frustrated’ over budget tax cuts for oil and gas

Dr. Nina Skorupska
Dr. Nina Skorupska

The British renewables industry today remains frustrated and unclear following announcements contained in the Chancellor’s Spring Budget. A new series of tax breaks and government support has been included for the fossil fuel industry, yet support for renewable energy ‘remains thin.’

A spokesman for the Renewable Energy Association – the largest such trade body in the UK – contrasted the government’s fiscal position on oil and gas with renewables. He said:

  • “For fossil fuels, the Government will:
  • Effectively abolish the Petroleum Revenue Tax
  • Reduce the Supplementary Charge from 20% to 10%
  • Provide an additional £20 million in funding for seismic surveys, and
  • Consult on a new shale wealth fund (in England only)

“And for energy intensive users, the Government will increase existing Climate Change Agreement (CCA) criteria, which will continue to shield energy intensive users and does little to assist them in shifting to a more efficient, lower-carbon model

“But for renewable generation, the Government will increase the Climate Change Levy which from 2019 now includes renewable power, and continue to freeze the Carbon Price Support rates at a time when it is needed to support renewable generation

Dr. Nina Skorupska CBE, REA Chief Executive, added: “The direction for this government is becoming increasing clear, with a huge tax cut for oil and gas with the most polluting industries continuing to be protected, but a tax raise for renewable generators through the now thoroughly misnamed Climate Change Levy”

“The removal of the supplementary charge for oil and gas industry amounts to a £1 billion giveaway, added on top of the subsidies planned for nuclear, gas and diesel this year, all whilst renewables are getting continually squeezed and blocked.

“The government has not offered real clarity around issues critical to new investment and employment growth in the renewables sector.

“This budget could have increased investor confidence by making clear the funding available in all future Contracts for Difference pots, the funding available for each technology, the date of the next CfD auction, or outlined the future of the Levy Control Framework after 2021.

Chris Towner, oil and gas partner at legal services firm Bond Dickinson Ltd LP added: “The budget does not change the current government’s narrative on renewables and low carbon. 

“The allocation of £730 million for support for projects that begin exporting power in the period beyond 2021 is helpful in that it gives the first piece of certainty that some support beyond 2021 will be available. 

On the other hand, when compared with the levy control framework cap of £9bn for projects that start generation in the period up to 2021, it implies a substantial slowdown in the likely rate of deployment for renewables and low-carbon technologies.” 

A Scottish Renewables spokesman added: “The lack of any further budget to support new renewable energy projects this side of April 2021 will be a major blow to large parts of the industry.

“Scotland’s islands remain in limbo, with no signal that they will be able to bid for future contracts at a price that enables them to absorb the massive grid charges that projects on the islands will face.

“The Government is clearly committed to supporting the continued growth of offshore wind, but it is going to be extremely challenging for industry to meet the cost reduction target set out, especially with the limited level of capacity that the budget can support. We will, however, do absolutely everything in our power to get there.”

A spokesman for RenewableUK commented: “We welcome the Chancellor’s announcement that funding will be available for future rounds of competitive auctions to support offshore wind farms.

“The budget is tight but we’re up for the challenge. We’re confident that today’s announcement will deliver 3.5 gigawatts of new offshore wind capacity between 2021 and 2025 – powering more than 3.5 million British homes. 
 
“The budget shows that offshore wind will be cheaper than new nuclear power and competing with gas by 2025.”

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