There are claims that a lack of change to the renewables windfall tax is undermining the UK’s claim to be a leader in green energy.
Senior renewables figures have accused Westminster of a “shameful dereliction of duty” for not making any adjustments to the electricity generator levy.
And there are fears that the failure to “create a level playing field” with other countries is “going to cost the UK dear”, as investment and skills heads elsewhere.
Nothing for renewables
While the government announced on Friday that it would build a price floor into the oil and gas levy, ministers are yet to confirm any relief for low carbon generators.
That is despite both sectors being subject to a windfall tax on extraordinary profits.
Announced as part of Chancellor Jeremy Hunt’s autumn budget, the EGL imposes a temporary 45% levy on renewables projects over a certain age.
© Aaron Chown/PA WireWhen taken with corporation tax, the policy brings the headline rate on earnings for green energy firms to 70%.
Crucially, there is no investment relief mechanism included in the EGL, while its oil and gas counterpart – the energy profits levy (EPL) – has a healthy spend incentive.
‘When it comes to renewables it does everything it can to hobble the sector’
Rod Wood, Community Windpower managing director said: “As Canada burns and El Nino begins superheating the Pacific Ocean, our Government has publicly demonstrated that it is in the pocket of oil and gas by cutting the windfall tax yet failing to appreciate renewable energy is the route to energy security.
“It cannot be right that as prices come down, their tax rate falls to 40% while retaining two investment allowances – allowing the oil and gas industry to obviate tax liability. Meanwhile the renewables sector is afforded no such equivalent treatment. This is a shameful dereliction of duty from a Government addicted to carbon. This ongoing failure to create a level playing field is going to cost the UK dear as we lose investment and talent to the US and Europe, all while the UK allegedly tries to reach Net Zero.
© Supplied by Bloomberg“While the Treasury panders to the oil and gas lobby, when it comes to renewables it does everything it can to hobble the sector. Make no mistake, this Government is living in the last century, learning no lessons from Putin’s weaponisation of energy, and has instead embarked on a new dash for gas.”
Following speculation on Thursday evening, the UK Government confirmed on Friday that the oil and gas windfall tax will be removed if commodity prices fall to “historically normal levels”.
The updated picture for oil and gas
The North Sea industry is currently taxed at 75% of profits, including the 35% windfall tax, which was introduced last year amid surging prices.
But the government said today if these fall “for a sustained period the tax rate for oil and gas companies will return to 40%”.
For the tax rate to drop, both average oil and gas prices need fall to, or below, $71.40 per barrel for oil and £0.54 per therm for gas, for two consecutive quarters.
Andrew MacNish Porter, policy manager at Scottish Renewables, said: “By continuing to provide investment allowances to oil and gas extraction the Energy Profits Levy continues to undermine the UK’s reputation as a leader in renewable energy.
“Meanwhile, the windfall tax on renewable energy generators has no such investment allowance and is therefore tempering the enthusiasm of international investors looking to the UK Government to provide a stable policy environment that encourages investment in clean power.
“Countries around the world, such as the USA and across the EU, are benefiting from unprecedented levels of investment support that if not matched will mean that the economic and environmental benefits that clean energy investment can deliver will be realised abroad whilst the UK misses out.
“The UK needs to catch up and match these incentives to ensure our industry remains an internationally competitive destination for renewable energy investment.”
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