The UK government today confirmed new renewable energy projects are to be exempted from the Electricity Generator Levy.
In the Autumn Statement, the Treasury said for schemes “where the substantive decision to proceed” or expand an existing asset is taken on or after 22 November, receipts will not be subject to the EGL.
The windfall tax was introduced by Chancellor Jeremy Hunt 12 months ago as a 45% levy on revenues above £75 per megawatt-hour made by generators not operating under a Contract for Difference.
While no longer applied to new projects, the measure remains in place until March 2028.
Legislation for the rule change will be made as part of an upcoming finance bill, according to the Treasury.
Scottish Renewables chief executive Claire Mack said the EGL investment allowance, as well as capital expensing provisions made in the Autumn Statement, are welcome but “not enough on their own”.
“We urgently need consistent policies to provide an environment which will enable businesses to invest at the scale needed right now.”
Energy and infrastructure tax partner at PwC UK Colin Smith added: “It is helpful that the government has listened to businesses and is seeking to remove potential EGL-related barriers to new electricity generation.
“However, the beneficial impact may be limited, given the long lead time between making a final investment decision and reaching first power, and the EGL sunset date of 31 March 2028.”
Other measures confirmed in today’s Autumn Statement include steps to speed up planning decision times and streamlining the UK’s grid connection process.
Energy UK chief Emma Pinchbeck said: “We welcome the permanent extension of full expensing, which we have been calling for along with the CBI and Make UK, and the introduction of an investment allowance in the Electricity Generation Levy, which addresses one of its major flaws.
“Investment will also be boosted if we can tackle the biggest challenge facing the energy transition – upgrading our infrastructure by massively speeding up the planning process and the time it takes to connect energy projects and businesses to the grid.
“The government’s focus on this issue of critical national importance is good news and we will study closely today’s response to the Winser Report on speeding up the connections process.”
RenewableUK CEO Dan McGrail added: “The decision to extend tax relief on freeports from five to ten years will help us to revitalise coastal communities by encouraging new investment in offshore wind manufacturing, including factories servicing innovative floating projects.
“Industry estimates that overall the offshore wind supply chain could boost the UK’s economy by £92bn by 2040.
“We also welcome the government’s commitments to reform the planning system by offering local authorities financial incentives to make decisions faster, as well as their ambition to cut grid connection delays from several years to six months.
“We look forward to further key announcements such as the publication in March of more details on next year’s CfD auction, which we hope will secure a record annual amount of new clean energy capacity.”