Five energy trade associations representing more than 750 companies have written a joint letter to the Chancellor Jeremy Hunt warning him that the competitiveness of the UK as a clean energy investment destination is at “severe risk“ unless he takes key steps in the Spring Budget to secure green growth.
In the letter, the chief executives of RenewableUK, Energy UK, the Nuclear Industry Association, Scottish Renewables and Solar Energy UK warn him that: “Despite our industry’s commitment to the low carbon energy transition, we are concerned that there is no clear government plan to deliver green economic growth and continue attracting clean energy investment into the UK.”
It highlights a “perfect storm“ of inflation, unfavourable exchange rates and the rising costs of raw materials and labour which are pushing up prices across all parts of the economy - including clean power sector where the cost of energy has increased by 20% globally in the past year.
As a result, many project developers and supply chain companies - which were already operating within very small margins - are now finding that profits are disappearing completely.
The trade associations are calling for key steps in the Spring Budget to address this, including a reform of capital allowances, and financial incentives for investment in low carbon energy in response to those being offered by the US in its $216bn Inflation Reduction Act and the European Union in its REPowerEU package.
The letter states that: “With many clean energy projects already delaying Final Investment Decision and supply chain companies squeezed by the energy crisis and inflationary pressures, a tangible step like enhanced capital allowances announced in the Spring Budget will do more to persuade investors than the promises of a future plan for economic growth.”
It also reiterates the fact that the UK has created an Energy Profits Levy with 91% investment relief for oil and gas, but an Electricity Generators Levy with 0% relief for clean power generators.
The statement therefore urges the Chancellor to address this by including an investment allowance in the Electricity Generators Levy to level the playing field with fossil fuels, as part of a wider reform of our capital allowances regime, to help preserve the UK’s international competitiveness.
The letter to the Chancellor concludes: “Any delay or shortfall in ambition will mean that our climate targets, and the economic opportunities they offer, will be increasingly hard to realise - time is against us and we cannot afford to get this wrong.”
Scottish Renewables chief executive Claire Mack commented: “The clean energy sector is one of the UK’s most dynamic and fastest-growing industries, and, with the right policy support, will be the means to revitalise our economy.
“However, with widespread uncertainty and increasing international competition, the UK’s status as a leading destination for investment in clean energy is at risk.
“It is therefore critical that the Spring Budget is used to reform our capital allowance regime to maintain the UK’s position at the forefront of the clean energy transition - any delay, and other places in the world will benefit from the unparalleled economic and environmental benefits that clean energy investment promises to deliver whilst the UK misses out.”
Energy UK chief executive Emma Pinchbeck explained that investment climate for UK low carbon generation has worsened over recent months.
“Increased costs and renewed international competition risk squandering the UK's lead as a clean technology pioneer.
“Government must - at the very least - reform the capital allowances regime to keep investment and industry here in the UK; we need this low carbon infrastructure to power our economy cheaply and get bills down in the long run".
Solar Energy UK chief executive Chris Hewett added: “Although the underlying economics of the power sector have now moved decisively in favour of renewables and there is a global race for net zero technologies, it is perverse that the UK Government is still tilting the playing field in support of high carbon energy.
“The Chancellor must use the Spring Budget to allow investors in renewables the same tax relief that is available to oil and gas companies.”
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