A group of trade associations from across the energy sector have written to the Chancellor urging him to prioritise incentives for green growth as part of the Spring Budget.
Five energy bodies representing over 750 companies signed a joint letter addressed to Chancellor Jeremy Hunt, warning that the UK’s competitiveness as an investment destination for clean energy is at “severe risk” unless he takes steps in the Spring Budget to secure green growth.
In their missive, the chief executives of RenewableUK, Energy UK, the Nuclear Industry Association, Scottish Renewables and Solar Energy UK raised concerns that there is “no clear government plan to deliver green economic growth” amid a regime that makes attracting clean energy investment increasingly difficult.
The group note that a “perfect storm” of inflation, unfavourable exchange rates and the rising costs of raw materials and labour are pushing up prices across the economy, including in the power sector where the levelised cost of energy (LCOE) has increased by 20% globally in the past year.
It also comes in the wake of the Autumn Budget, in which Mr Hunt imposed a windfall tax on energy generators, as well as raising additional rates on oil and gas firms.
Applicable from the start of this year, the Electricity Generator Levy adds a temporary 45% levy on electricity sold above £75MWh. Combined with corporation tax, it brings the cumulative rate on earnings over £75Mwh to 70%.
The executives point out that that the levy on oil firms also includes a 91% investment relief for new projects – and greater than 100% for offshore decarbonisation projects – though no comparable rebate is offered to clean power generators.
The measures had an immediate chilling effect, with SSE boss Alistair Phillips-Davies saying his company may have to “give up” on some of its investment plans as a result.
Meanwhile, figures released last month suggest the North Sea levy raised nearly 25% less than expected for Treasury coffers last month, on the back of more volatile oil and gas prices.
© Supplied by Renewable UKIncreasing competition for capital
The trade associations today called on the Chancellor to “level the playing field” via reforms to the UK’s capital allowances regime, and pointed to the generous clean growth incentives offered by the US in its $216 billion Inflation Reduction Act (IRA) and the European Union in its REPowerEU package.
“With many clean energy projects already delaying Final Investment Decision (FID) and supply chain companies squeezed by the energy crisis and inflationary pressures, a tangible step like enhanced capital allowances announced in the Spring Budget will do more to persuade investors than the promises of a future plan for economic growth,” the latter adds.
Commenting on the letter, Scottish Renewables CEO Claire Mack added: “The clean energy sector is one of the UK’s most dynamic and fastest-growing industries, and, with the right policy support, will be the means to revitalise our economy.
“However, with widespread uncertainty and increasing international competition, the UK’s status as a leading destination for investment in clean energy is at risk. It is therefore critical that the Spring Budget is used to reform our capital allowance regime to maintain the UK’s position at the forefront of the clean energy transition.
“Any delay, and other places in the world will benefit from the unparalleled economic and environmental benefits that clean energy investment promises to deliver whilst the UK misses out.”
RenewableUK CEO Dan McGrail also warned that investments in renewable energy and its supply chains may “dry up” without “decisive action”, while Energy UK boss Emma Pinchbeck said greater cost pressure and international competition could risk “squandering” the UK’s position as a technology leader.
“Any delay or shortfall in ambition will mean that our climate targets, and the economic opportunities they offer, will be increasingly hard to realise,” the letter concludes.
“Time is against us and we cannot afford to get this wrong.”
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