Renewables to pay UK Climate Change Levy in bitter Budget shock for sector

Dr. Nina Skorupska
Dr. Nina Skorupska

Chancellor Osborne’s UK Budget today contained no surprises for the oil and gas sector – merely confirming that the tax cuts announced in his March budget – are going ahead.

But in a fresh blow for the sector,  there was another bitter pill for the renewables sector in Scotland and England, with the removal of the climate change levy exemption.

Osborne said: “Now we have a long term framework for investment in renewable energy in place, we will remove the out-dated Climate Change Levy exemption for renewable electricity that has seen taxpayer money benefitting electricity generation abroad.”

Renewable UK, the trade association representing the wind, wave and tidal energy industries, has criticised the Chancellor’s announcement in his budget speech that he is retrospectively changing the rules governing the Climate Change Levy – a measure which was originally designed to promote the generation of clean energy.  

And the Renewable Energy Association – the biggest such trade body in the country – fears that making the sector liable to the climate change levy will affect all renewable and low-carbon generation for its members.

Dr Nina Skorupska, Chief Executive, Renewable Energy Association, said: “Whilst there was an issue with foreign generators benefiting from this policy, it has also driven investment, and has been factored into both original project finance decisions and current business plans.

“This measure is due to come into effect on 1 August. Such snap changes undermine confidence in the UK from the finance community, as well as making renewables less attractive compared to fossil fuel generation.

The value of the exemption was worth £5.50 per MWh, and all financial assumptions have been based on this. We urge the Chancellor to re-think this move.

“The removal of the Climate Change Levy exemption for renewables will have a significant effect for our members immediately, and will undermine investor confidence by changing the stable market conditions needed for financing and business planning.

“If the intention was to remove the anomaly of international firms benefiting from the CCL exemption, this is a disproportionate action that now turns a measure designed to encourage low-carbon electricity, into just an electricity tax for business.”

Dr Gordon Edge, Renewable UK Director of Policy, said: The Chancellor’s announcement that renewable electricity will no longer be exempt from the Climate Change Levy is a punitive measure for the clean energy sector.

“Until now, Levy Exemption Certificates generated as a result of the climate change levy have provided vital financial support for renewable energy producers.

“The Chancellor says the removal of the exemption will earn the Treasury £450 million in 2015/16, rising to £910 million in 2020/21.

“We’re suddenly looking at a substantial amount of lost income for clean energy companies which was totally unexpected.

“For example, Levy Exemption Certificates account for just over 6% of onshore wind generators’ revenues.

“The Government had already announced an end to future financial support for onshore wind – even though it’s the most cost-effective form of clean energy we have. Now they’re imposing retrospective cuts on projects already up and running across the entire clean energy sector.”

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