Chancellor urged to offer tax incentives to help UK realise green energy projects

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Could the tax system be key to the UK’s efforts to fulfil its green energy generation targets? The answer to that could well be yes, at least according to industry leaders who have said a clear plan is needed – complete with tax incentives to help get crucial developments off the ground.

As the 2023 Spring Budget looms on 15th March, five trade associations have penned a joint letter to Chancellor of the Exchequer Jeremy Hunt, arguing that he should introduce measures in his upcoming Budget to help prevent the UK from falling behind the United States and the European Union in its green competitiveness.

The organisations behind the letter said that delays had hit a number of projects as supply chain companies found themselves battling high inflation and the energy crisis.

“No clear government plan to deliver green economic growth”

The joint letter from the chief executives of RenewableUK, Energy UK, Scottish Renewables, Solar Energy UK, and the Nuclear Industry Association said: “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.”

The letter added that “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 suggested that capital allowances should be reformed and financial incentives offered for investment in low-carbon energy, in the face of those the US and EU are offering in the Inflation Reduction Act and REPowerEU package, respectively.

Also pointed out by the letter was that while the UK Government had created an Energy Profits Levy providing 91% investment relief for oil and gas, it also had an Electricity Generators Levy, which offered 0% relief for clean power generators.

The organisations said that Mr Hunt’s Spring Budget could address this through the inclusion of an investment allowance in the Electricity Generators Levy. This, the trade associations argued, would allow for a level playing field with fossil fuels as part of a broader reform of the UK’s capital allowances system.

As Dan McGrail, CEO of RenewableUK, characterised the group’s position: “Investments in renewable energy and new supply chains may dry up unless the Chancellor takes decisive action and implements the key measures which we have set out in our letter to secure tens of thousands of high-quality jobs and attract billions in private investment”.

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