Ahead of the 2013 Budget announcement today, the Renewable Energy Association (REA) has set out the key areas that the chancellor should tackle to kick start the UK’s low-carbon economy.
The Treasury recently announced that it is accepting 81 of the 89 recommendations laid out in Lord Heseltine’s No Stone Unturned report last year, which warned that without the “real certainty” of a long-term energy policy, investors will “simply not risk the enormous sums of capital” needed to develop the UK’s energy infrastructure.
The REA is pressing for George Osborne to acknowledge Heseltine’s recommendation that government needs to “set out a definitive and unambiguous energy policy, including the supporting financial regime, to give the sector the certainty to invest.”
In particular, the REA said it would like to see announcements made on the following:
The REA believes that renewable energy should start to be prioritised for support in order to play a much bigger role in the government’s infrastructure narrative. The REA is calling for further policy clarity as well as commitment. An example would be the inclusion of renewables as part of the BIS Infrastructure Strategy programme.
Levy Control Framework (LCF)
The LCF contains the potential budget draw for various low-carbon technologies including, renewables, carbon capture and storage and nuclear. In the Energy Bill, the budget for the LCF was tripled to £7.6 billion by 2020. The REA is stressing the importance of not diluting the support by including other support measures to the LCF.
Renewable Heat Incentive (RHI) budget to 2020
Currently the RHI budget is only set out until 2015. As the LCF is outlined until 2020 the REA is calling for a new budget that would be capable of realising the objective of 12% renewable heat by 2020.
Potential imposition of 20% VAT rate on domestic energy products
The Treasury is opposing the European Commission’s efforts to increase VAT from 5% to 20% on energy-saving material which includes solar panels. The REA would welcome a robust stance from Treasury and hope its intervention is successful.
Enhanced capital allowances (ECAs)
The Treasury recently made changes to the rules for ECAs so that it can no longer be claimed if the user claims support from the feed-in tariff (FiT) or RHI. In addition, it designated expenditure on solar panels at a higher rate for capital allowances purposes. Both of which the REA has come out against. The REA believes that there is a case for incentivising electricity storage technologies by providing ECAs to complement on-site renewable electricity.
Carbon Reduction Commitment (CRC)
DECC recently closed a consultation on the CRC in which it noted that the scheme required rectifying following a number of concerns. The REA asserts that the CRC has dis-incentivised investment in renewables for the commercial sector which is troubling as the commercial sector will play a vital role in renewables investment.
Business rates freeze and adjustment of renewable energy project business rates
The REA is calling for a freeze on the RPI price increase for business rates for renewables. At the moment new renewable energy projects will be valued as at April 2008 assessments with rates increasing with RPI until April 2017.
The REA is also calling for the readjustment of renewable energy project business rates because fossil fuel plants pay lower rates. The REA would like to see this policy anomaly addressed, reducing the burden of business rates for renewable energy projects.
Zero Carbon Buildings policy
Government has suggested that for buildings to achieve full ‘zero carbon’ status they will have to make use of ‘Allowable Solutions’ (off-site carbon offsetting mechanisms) but it has yet to commit to how this might work and, importantly, Treasury and DCLG need to specify the target carbon price for the abated emissions. The REA stresses that the 2016 target date is drawing close and time is running out to flesh out and implement the policy.
Commenting on the upcoming Budget announcement, REA chief executive, Gaynor Hartnell, said: “After conflict with DECC on energy policy, the chancellor has an important role to play to establish confidence in a more consistent and supportive political landscape. We very much hope to hear positive rhetoric from him on renewables and, even better, some hard measures to boost renewables investment. This would build on his recognition in last year’s Budget speech that renewable energy has a 'crucial' role to play.”