- The REA responds to today’s announcement that the Government will introduce a new Energy Security Investment Mechanism;
- Government are focusing tax cuts on fossil fuel producers, while the equivalent windfall tax on renewables remains unchanged;
- The REA stresses that the Energy Security Investment Mechanism must be extended to renewables if government are serious about energy security.
The REA (Association for Renewable Energy and Clean Technology) has responded to government’s new oil and gas tax changes. The Government will introduce a new Energy Security Investment Mechanism which will reduce the marginal windfall tax rate on Oil and Gas producers, called the Energy Profits Levy, when energy prices return to consistent normal levels. The intention is to ensure that investments in domestic energy supply are safeguarded.
However, the REA says that being serious about protecting energy security and British jobs requires applying these benefits to the cheapest forms of domestic electricity generation, which also happen to be critical to delivering a decarbonised electricity system. As such the Energy Security Investment Mechanism must also be extended to reduce the tax rate being placed on the low carbon generators under the equivalent Electricity Generator Levy.
The renewables and clean tech sector is key to tackling the volatile costs of fossil fuels at the heart of rising energy bills, and its treatment must be fair and equitable in relation to the oil and gas sector.
Mark Sommerfeld, Head of Power and Flexibility at the REA (Association for Renewable Energy and Clean Technology) said:
“Once again, the Government are focusing tax cuts on fossil fuel producers, while the equivalent windfall tax on renewables, called the Electricity Generator Levy (EGL), remains unchanged. Today’s announcement for the Energy Security Investment Mechanism will reduce the tax liability on oil and gas producers when energy prices return to consistently normal levels, however, will not apply to renewable generators, despite a harsher tax on low carbon generation.
Furthermore, the Government have repeatedly ignored calls to introduce a dedicated Investment Allowance for renewables, which would promote low carbon investment, despite the equivalent allowance again already being in place for oil and gas.
“Government is presenting today’s announcement as necessary for delivering energy security, yet it is not applying these benefits to the cheapest forms of domestic electricity generation, which also happen to be critical to delivering a decarbonised electricity system.
“If Government is at all serious about energy security, The Energy Security Investment Mechanism must be extended to renewables and the EGL be urgently reformed.”
Notes to editors
- The Electricity Generator Levy is a 45% tax on ‘extraordinary returns’ from low-carbon UK generation, which is being legislated to be in place until March 2028. The introduction of the EGL forms part of the Government’s response to the energy crisis and is separate from the Energy Profits Levy (EPL), which is already in law and applies to companies involved in the production of oil and gas. The announced Energy Security Investment Mechanism is expected to only apply to the Energy Profits Levy, not the EGL.
- In the EPL, oil and gas producers have been provided investment allowances of 29 – 80% against which the levy can be offset if profits are being invested in new production. These allowances have not been extended to the renewables sector under the EGL.
- The EGL is yet to come into force, but the legislation is currently before parliament as part of the Finance Bill. It is expected to receive Royal assent in June/July, at which point the levy on low carbon generation will be retrospectively applied back to the 1st January 2023 and be in place till 2028.
About the Association for Renewable Energy and Clean Technology (REA): The Association for Renewable Energy and Clean Technology (known as the REA) is the UK’s largest trade association for renewable energy and clean technologies with around 550 members operating across heat, transport, power and the circular economy. The REA is a not-for-profit organisation representing fourteen sectors, ranging from biogas and renewable fuels to solar and electric vehicle charging. Membership ranges from major multinationals to sole traders. For more information, visit: www.r-e-a.net