The group has calculated that the removal of the Climate Change Levy exemption for renewables, announced in yesterday’s Budget, will cost the AD industry around £11 million in revenue each year.
The Budget’s small print outlines that renewable electricity will no longer be exempt from the Climate Change Levy, stating that: “This change will correct an imbalance in the tax system by preventing taxpayers’ money benefitting renewable electricity generated overseas, and by helping ensure support for low carbon generation provides better value for money for UK taxpayers.”
ADBA chief executive Charlotte Morton said the claim that this change is to correct an imbalance is “misleading”, as “only a third of the climate change levy goes to renewable electricity generated overseas”.
“The rest of the levy is currently spent supporting the UK’s renewable electricity market at around £5 per MWh, which developers took into account when putting their business models together,” she added. “Without the exemption for renewable sources, the AD industry will lose £11 million in revenue each year – hurting existing operators and putting further investment at risk.”
Earlier this month, ADBA warned that uncertainty around government funding for green gas-to-grid plants could put more than 460 projects “in jeopardy”.
The Chancellor’s announcement comes as the industry faces political uncertainty, due to the imminent feed-in tariff review and absence of confirmation that the Renewable Heat will be extended beyond March 2016.
“The UK needs renewable energy to keep the lights on and meet climate change targets,” Morton said. “We are deeply disappointed that the industry was not consulted on this decision and remain concerned about the government’s real support for the green economy.”
Analysts have suggested that the Treasury’s decision to axe exemptions to the Climate Change Levy will come at multi-billion pound cost to all renewable generators over the next five years, which will ripple out to suppliers and their customers.