Plant and machinery used to generate and store renewable energy onsite will be exempt from business rates, the government announced in the Budget on Wednesday (27 October).
As part of a wider review of business rates, the Budget also contained a move to offer 100% relief for heat networks.
The changes due to be introduced from 2023 are part of a wider push to reduce business rates while supporting efforts to decarbonise the UK’s buildings stock.
The business rates exemption was welcomed by the Association for Renewable Energy and Clean Technology (REA). Chief executive Nina Skorupska said: “The government’s heeding of our calls for a green business rate relief is certainly welcome and will support businesses in taking necessary steps to reduce their carbon footprint in a challenging economic climate.”
However, Skorupska expressed disappointment that the Treasury had not taken other fiscal steps that would have supported the decarbonisation ambitions outlined in last week’s pan-government Net Zero Strategy.
“Straightforward measures such as removing VAT on domestic renewables and clean technologies would have provided a catalyst for businesses and the economy, offered households long-term protections against volatile energy bills, and signalled a real statement of intent.
“In addition, while recognising the financial challenges faced by many motorists, any fuel duty freeze should have been accompanied by extra support to make electric vehicles more affordable and accessible.”
The Budget also stated that the Carbon Price Support for 2023/24 will continue to be frozen at a rate of £18 per tonne of carbon dioxide in Great Britain.
Elsewhere in the Budget, it emerged that Rishi Sunak has asked the National Infrastructure Commission to investigate how surface water flooding risks can be better managed, while handing the body a new objective to support the net zero emissions drive.
The chancellor of the exchequer has written to NIC chairman Sir John Armitt to commission a new study on the effective management of surface water flooding in England.
The study, which is due to report next year, will assess the current approaches to managing surface water and consider the role of a range of interventions including both traditional built infrastructure and nature-based solutions, like sustainable urban drainage systems.
The commission will seek to identify improvements needed to England’s drainage systems to manage and mitigate surface water flooding, the likelihood of which is increasing due to climate change.
The study will form part of the NIC’s work programme for its second National Infrastructure Assessment, further details of which will be published in November.
To reflect the recent ratcheting up of the UK’s emissions reduction targets, the spending review document also announced an “additional objective” for the NIC to consider how its advice can support climate resilience and the transition to net zero carbon emissions by 2050.
And the Treasury has announced an increase in the spending ceiling that the NIC should use when making recommendations about infrastructure spending.
Documents accompanying the Budget say the NIC’s recommendations should be within a range of 1.1% and 1.3% of GDP per annum from 2025 to 2055. This compares to the original range set in 2016, when the NIC was established, of 1.0% to 1.2% for the period 2020 to 2050.
Responding to the addition of the net-zero objective, Sir John said: “From our proposals on increasing renewable energy generation to enabling the end of the sale of petrol and diesel vehicles, the commission’s recommendations have always reflected the importance of moving to a low carbon economy.
“We are pleased that this objective has now been made explicit. Infrastructure will play a crucial role in achieving net zero by 2050 and protecting biodiversity, and the commission stands ready to advise government on the necessary decisions ahead.”