The renewables sector has responded to George Osborne latest Budget with varying levels of criticism after tax breaks for oil and gas were put forward while low carbon generation received short shrift from the chancellor.
In a Budget dubbed "fairly low-key on the energy side" by Richard Black of the Energy and Climate Intelligence Unit (ECIU), Osborne offered little to boost the UK’s clean energy agenda despite rampant cuts over recent months. Instead, oil and gas industries are to benefit from the decision to effectively abolish the Petroleum Revenue Tax on profits, while the additional Supplementary Charge is to be halved to 10%.
Meanwhile the Climate Change Levy (CCL), which now includes renewable power, is to be increased in 2019 to compensate for the removal of the Carbon Reduction Commitment. A second consultation will be launched in the summer to flesh out the detail of these proposals following an initial consultation conducted last year.
The Solar Trade Association (STA) has claimed this review will be extremely important to the solar industry as the inclusion of renewables in the CCL will remove a key incentive for businesses seeking to take up solar.
Paul Barwell, chief executive of the STA, said: “It is vital that regulatory measures support solar investment as strongly as possible. It is perverse that renewables supplying clean power via the grid are taxed on the carbon they do not emit - this situation surely cannot continue until 2019.
“Businesses understand the climate threat and many want to go solar. Government has an opportunity to align the new business carbon tax to support investment in solar. This will give a much needed boost to solar deployment and help to get solar cost reductions back on track at no cost to domestic bill-payers.”
Despite the potential of the review, the continued support for fossil fuel generation drew criticism from the Renewable Energy Association, which claimed the announcements did little to reflect the move towards a low carbon future.
Dr. Nina Skorupska, chief executive of the REA, said: “The direction for this government is becoming increasingly 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.
“Less than three months after the government heralded the signing of the Paris agreement, we see more support for fossils fuels and protection for polluters. If the government are serious about their national and international commitments they need to back up the empty rhetoric with real actions”
The chancellor also announced plans for £730 million to be used for additional Contracts for Difference (CfD) auctions over the current Parliament. Solar is to be excluded from these, with the funds only available to offshore wind and other less developed technologies.
In addition, at least £50 million is to be allocated for innovation in energy storage, demand-side response and other smart technologies over the next five years to help new technologies and business models access the market. This follows a report from the National Infrastructure Commission, which suggested the government support and even incentivise new technologies like storage.
According to the Budget documents, the government will implement the commission’s recommendations, working with Ofgem to remove regulatory and policy barriers, positioning the UK to become a world leader in flexibility and smart technologies, including electricity storage.
However, despite these outcomes, the chancellor’s latest Budget has drawn the ire of many across the renewables sector for failing to deliver post-Paris. Despite plans for the COP21 agreements to be enshrined in law that were announced earlier this week, many have claimed the government is failing to live up to its international promises.
Richard Black said: “Although the chancellor said several times that this was a Budget for future generations, it’s not evident that he has internalised the implications of the recent Paris climate summit, and the concrete measures he’s announced barely make a difference to this generation.”
This was echoed by Friends of the Earth campaigner Liz Hutchens, who said: “The chancellor’s Budget was full of ‘next generation rhetoric’, but tax breaks for the climate-wrecking oil and gas industry pose a real threat to the security of people, the economy and planet. It’s almost as if the recent UN climate agreement never occurred. What happened in Paris, appears to have stayed in Paris.
“This government should do far more to develop the UK’s huge renewable energy potential – creating jobs and putting us at the forefront of building an economy fit for the challenges of the future.”