The renewables industry has reacted angrily to the news that renewable energy will no longer be exempt from the climate change levy (CCL).
The CCL was introduced in 2001 to incentivise “green” energy, with businesses and public sector organisations that purchase renewable energy earning exemption certificates (LECs) they can use to offset payments under the levy.
George Osborne announced yesterday that the exemption would be removed from renewable electricity from 1 August. The chancellor said the move would prevent taxpayers’ money benefitting renewable electricity generated overseas. The change will earn the Treasury £450 million in 2015/16, rising to £910 million in 2020/21, according to the budget document.
The government will consult on a transitional period for suppliers to claim the CCL exemption on renewable electricity that was generated before that date, Osborne said.
Renewable UK said the move was another example of the government’s “unfair, illogical and obsessive attacks on renewables”. LECs account for just over 6% of onshore wind generators’ revenues, according to Gordon Edge, director of policy at the trade body.
“The government had already announced an end to future financial support for onshore wind – even though it’s the most cost-effective form of clean energy we have. Now they’re imposing retrospective cuts on projects already up and running across the entire clean energy sector,” he said.
Greenpeace accused Osborne of being out of step with the times. Its policy director Doug Parr said: “Osborne is taxing clean power as if it were a fossil fuel. This will make it more expensive for businesses to buy electricity from renewable power.”
Shares in Drax power station tumbled by 28% following the news. In a statement, the company said that the change would cost it around £30 million next year, and £60 million in 2017, though the impact would reduce after that. Drax chief executive Dorothy Thompson said the company was “surprised and disappointed,” by Osborne’s announcement.
At the end of last year, Drax converted its second generation unit to run on biomass. This was cited as the main reason behind a 46% rise in renewable electricity from bioenergy in Q1 2015 compared with the same period in 2014.
The figure was revealed in the government’s latest renewable electricity data, published today. The statistics also reveal that renewables’ share of electricity generation was a record 22.3% in the first three months of 2015, up 2.6 percentage points on Q1 in 2014. The rise was mainly due to increased capacity, with solar photovoltaics growing by 60% and onshore wind by 5.3%, according to the energy and climate change department (Decc).