Chancellor Jeremy Hunt’s windfall tax on electricity generators will threaten investment into UK renewables, according to the Association for Renewable Energy and Clean Technology (REA).
“We would question the wisdom of subjecting cheaper, greener renewable power sector to a more punishing tax system than its oil and gas counterparts,” said REA policy director Frank Gordon.
North Sea oil and gas firms can gain an effective 91% tax break by investing in new infrastructure and developments, but this policy has not been offered to electricity generators, something that has angered the UK renewables sector.
As a result, the REA suggested there were early signs that investment falling in the sector, following a survey of its members.
This equates to “hundreds of millions of pounds,” it said.
From January 1, firms generating electricity from nuclear, renewable, biomass and waste sources will face a 45% windfall tax on “expectational receipts,” the government confirmed on Tuesday.
This means “wholesale electricity sold at an average price in excess of £75 per MWh.”
Firms facing “exceptional costs” will gain tax breaks though, with the likes of Drax and Centrica set to benefit from these given their use of more expensive bio and nuclear fuels, according to Jefferies analysts.
“The REA is now urging the Prime Minister and Chancellor of the Exchequer for further clarity on the levy,” added Gordon.