# Britain’s tax take risks blowing green energy off target Author: Pal Sinha, Barnali Author URL: https://financedigest.com/author/pal-sinha-barnali Published: 2023-03-13 Category: NEWS Category URL: https://financedigest.com/category/news Meta Title: Renewable Energy Development Hindered by Lack of Incentives Meta Description: Industry officials advocate for policy changes to reach net-zero emissions goal by 2050 amid tax issues and rising costs. URL: https://financedigest.com/britains-tax-take-risks-blowing-green-energy-off-targethtml ![undefined](https://prod.superblogcdn.com/site_cuid_cm5qst7v3003gwirgwqtxn8i8/images/2023-03-13t162049z4lynxmpej2c08hrtroptp4britain-budget-renewables-1736814325733-compressed.jpg) By Susanna Twidale and Shadia Nasralla LONDON (Reuters) – A cap on revenue and the lack of the kind of incentives offered to oil explorers are blocking the development of renewable energy in Britain, say industry officials who are pressing for changes ahead of this week’s budget. The British government has set targets for major increases in wind generation, for instance, as it seeks to meet a goal of net zero emissions by 2050 and to become more independent of imported energy following the supply disruption caused by Russia’s invasion of Ukraine. Representatives of the renewable energy sector say those goals could be missed without policy changes, especially as other [countries are doing more to attract investment](https://www.financedigest.com/buyers-shun-city-centres-for-country-villas-when-it-comes-to-lifestyle-investment-in-iberia.html "BUYERS SHUN CITY CENTRES FOR COUNTRY VILLAS WHEN IT COMES TO LIFESTYLE INVESTMENT IN IBERIA") in green power. Among the most contentious issues is Britain’s Electricity Generator Levy (EGL), which the government implemented from the start of this [year to combat high energy prices](https://www.financedigest.com/hong-kong-home-prices-drop-15-6-in-2022-snap-13-years-of-gain.html "Hong Kong home prices drop 15.6% in 2022, snap 13 years of gain"), and which the industry says is a “de facto windfall tax. Rod Wood, managing director at wind energy [developer Community Wind Power](https://www.financedigest.com/edf-edison-ansaldo-team-up-to-develop-nuclear-power-in-europe.html "EDF, Edison, Ansaldo team up to develop nuclear power in Europe"), is among those seeking changes to the EGL in Britain’s March 15 budget. The taxation (EGL) is going to kibosh renewable [targets](https://www.financedigest.com/eu-sets-recycling-reuse-targets-to-cut-packaging-waste.html "EU sets recycling, reuse targets to cut packaging waste") the UK has set,” he said. Specifically, he wants it to include an investment allowance like the one oil and gas companies [receive under their equivalent Energy](https://www.financedigest.com/petrofac-hitachi-energy-receive-14-billion-agreement-from-tennet.html "Petrofac, Hitachi Energy receive billion agreement from TenneT") Profits Levy (EPL). The EPL includes an investment incentive that means oil and gas [firms can offset from their tax](https://www.financedigest.com/top-north-east-financial-adviser-firm-talks-corporation-tax.html "Top North East financial adviser firm talks corporation tax") bill 91.40 pounds in every 100 pounds spent on new production. British government targets include increasing [offshore wind](https://www.financedigest.com/norway-to-ramp-up-offshore-wind-in-drive-to-go-green.html "Norway to ramp up offshore wind in drive to go green") capacity to 50 gigawatts (GW) from around 14 GW now. Wood said without tax changes, his company would be forced to halt development of three onshore [Scottish projects](https://www.financedigest.com/sse-to-invest-122-million-in-scottish-pumped-hydro-project.html "SSE to invest 2 million in Scottish pumped hydro project"), totalling 1.2 GW, which by 2025 could be generating enough power for more than a million homes. When you look at how much [costs have gone up in the UK versus stimulus packages on offer](https://www.financedigest.com/amazon-offers-shoppers-10-to-pick-up-purchases-as-it-targets-delivery-costs.html "Amazon offers shoppers to pick up purchases as it targets delivery costs") in the U.S., it’s not hard to see anyone who can will be relocating business there,” he said. U.S. President Joe Biden’s administration last [year signed into law the Inflation](https://www.financedigest.com/spains-inflation-to-be-lower-this-year-than-in-2022-minister.html "Spain’s inflation to be lower this year than in 2022 -minister") Reduction Act, which delivers a support package for clean technology worth $370 billion. INFLATION, [SUPPLY CHAINS](https://www.financedigest.com/minimising-supply-chain-cyber-risks-by-asking-the-right-questions.html "MINIMISING SUPPLY CHAIN CYBER RISKS BY ASKING THE RIGHT QUESTIONS"), INTEREST RATES Other [developers say](https://www.financedigest.com/mobile-games-developer-huuuge-says-has-24-2-million-at-svb.html "Mobile games developer Huuuge says has .2 million at SVB") the combination of levies, high energy prices, supply chain bottlenecks, inflation and interest rate rises means their projects are under threat. Denmark’s Orsted last week said its Hornsea 3 project in the North Sea, which at around 3 GW would be the world’s largest windfarm when built, could be paused unless it gets support such as [tax breaks](https://www.financedigest.com/are-there-tax-breaks-for-business-health-insurance.html "Are there tax breaks for business health insurance?") because costs have surged. Another [major project](https://www.financedigest.com/britain-delays-major-rail-project-hs2-as-costs-soar-again.html "Britain delays major rail project HS2 as costs soar again") is the Vattenfall group’s Norfolk Offshore Wind Zone. Rob Anderson, its project director, said the British government “must show its [support for the sector in next week’s budget](https://www.financedigest.com/energy-bill-support-pushes-uk-budget-deficit-to-february-record.html "Energy bill support pushes UK budget deficit to February record") through capital allowances. Under the EGL, a 45% [tax on low-carbon power generators applies to revenue on power generation at an aggregate price above 75 pounds](https://www.financedigest.com/shell-to-evaluate-25-billion-pound-british-investments-after-windfall-tax.html "Shell to ‘evaluate’ 25 billion pound British investments after windfall tax") ($89) per megawatt hour (MWh). With wholesale [electricity prices](https://www.financedigest.com/swedish-energy-minister-need-to-decouple-gas-from-electricity-price.html "Swedish energy minister: need to decouple gas from electricity price") around 120 pounds/MWh, the level at which the tax kicks in is too low, Wood said, citing more generous levies in Europe. The European Commission has [set a revenue cap on electricity companies](https://www.financedigest.com/italys-eni-sets-up-sustainable-transport-services-company.html "Italy’s Eni sets up sustainable transport services company"), requiring them to hand over any excess revenue to national governments they get for selling their non-gas generated power over 180 euros ($190)/MWh. OIL AND GAS SECTOR UNHAPPY TOO Oil and gas producers, which have been subject to a [windfall tax](https://www.financedigest.com/exxon-sues-eu-in-move-to-block-new-windfall-tax-on-oil-companies.html "Exxon sues EU in move to block new windfall tax on oil companies") since May 2022, also want change. They say the Energy Profit Levy (EPL) windfall tax which last year [raised the tax rate](https://www.financedigest.com/bank-of-england-raises-rates-to-3-5-says-inflation-has-peaked.html "Bank of England raises rates to 3.5%, says inflation has peaked") to 75%, one of the world’s highest, is shrinking producers’ access to funding. UK government revenue from oil and gas sector UK government revenue from oil and gas sector https://www.reuters.com/graphics/BRITAIN-OIL/TAX/akpezrnzavr/chart.png ![](https://www.globalbankingandfinance.com/wp-content/uploads/2023/03/chart1.jpg) Renewable developers say the oil and gas [sector has for years](https://www.financedigest.com/2020-the-paradoxical-year-that-has-reshaped-the-future-of-motor-insurance-and-related-sectors.html "2020: The paradoxical year that has reshaped the future of motor insurance and related sectors") enjoyed tax breaks, while green groups say the sector should no longer be given any incentives given the need to phase out fossil fuel. The [British fossil fuel industry says](https://www.financedigest.com/british-doctors-strikes-risk-patient-safety-minister-says.html "British doctors’ strikes risk patient safety, minister says") it is still necessary to invest in the ageing North Sea basin and home-grown fuel is far less polluting than importing oil and gas from distant places where supply might be more easily disrupted. It also says [higher tax rates should kick in only when profits](https://www.financedigest.com/polish-e-commerce-firm-allegro-eyes-higher-q1-profit.html "Polish e-commerce firm Allegro eyes higher Q1 profit") are derived from prices above a yet-to-be-agreed price floor, based on an historic average, rather than the entire profit regardless of price as is currently the case. The industry also wants the tax to apply to realised prices, which include hedging results, rather than broader [market prices](https://www.financedigest.com/german-residential-property-market-faces-risk-of-price-drop-diw-study.html "German residential property market faces risk of price drop – DIW study"). Many [oil and gas producers hedge large chunks of their output](https://www.financedigest.com/uk-oil-gas-firms-to-leave-years-worth-of-output-in-ground-with-tax-hikes-report.html "UK oil, gas firms to leave year’s worth of output in ground with tax hikes-report") to comply with lenders’ demands, which means their exposure to market price changes is limited. [Finance Minister](https://www.financedigest.com/scottish-finance-minister-kate-forbes-to-run-for-countrys-leadership.html "Scottish finance minister Kate Forbes to run for country’s leadership") Jeremy Hunt, in a meeting in December, rebuffed calls from the oil and gas industry to amend the windfall tax. Further meetings, including in late February with Treasury officials have taken place, but no change was expected from the March 15 budget, two [industry sources](https://www.financedigest.com/german-new-passenger-car-registrations-up-3-in-august-industry-source.html "German new passenger car registrations up 3% in August – industry source") said, declining to be named. Meanwhile, Britain’s biggest oil and gas producer Harbour, has announced [job cuts](https://www.financedigest.com/icrc-to-cut-some-1500-jobs-as-humanitarian-budgets-seen-sliding.html "ICRC to cut some 1,500 jobs as humanitarian budgets seen sliding") and shunned the latest licensing round. TotalEnergies cut its UK [investment programme](https://www.financedigest.com/board-of-russias-avtovaz-approves-585-million-in-2023-investment-programme-ria-agency.html "Board of Russia’s AvtoVAZ approves 5 million in 2023 investment programme – RIA agency") by a quarter. ($1 = 0.8395 pounds) ($1 = 0.9459 euros) (Reporting By Susanna Twidale, additonal reporting by Shadia Nasralla; editing by Barbara Lewis) --- This blog is powered by Superblog. Visit https://superblog.ai to know more. ---