Chancellor curtails Climate Change Levy relief

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George Osborne has infuriated green energy producers and campaigners with a £910m-a-year raid on the renewable energy sector by changing a climate change levy (CCL) at the same time as providing more fiscal help for North Sea oilfields.

Government Officials admitted that so-called “green” energy schemes will require a staggering £9 billion a year in subsidies – paid for by customers – by 2020.  This is £1.5 billion more than the maximum limit the coalition had originally planned.  The excess spending is thought to be a result of higher than expected numbers of solar panels being fitted on houses, falling wholesale energy prices, and offshore wind farms proving more productive than anticipated.

RenewableUK, the lobby group, said the changes would cost green energy producers around £450m in the current financial year and up to £1bn by 2020-2021.

George Osborne’s budget measures included removing the CCL exemption from renewable electricity schemes and promised streamlining other taxes.  He said: “The Government will review the business energy efficiency tax landscape and consider approaches to simplify and improve the effectiveness of the regime.  A consultation will be launched in autumn 2015.”

Osborne also promised to bring forward proposals for a sovereign wealth fund for communities that host shale gas developments, to expand the North Sea investment, and cluster area allowances to include additional activities.

Phil Grant, of management consultants Baringa Partners, said the budget was bad news for investors in green power. “Britain is a world leader in green energy but the abolishment of climate change levies for renewables is another blow for an already fragile sector. Investors were perturbed by recent decisions… to reduce subsidies for new renewable plants and we’ve seen the share prices of companies exposed to renewables take a further hit.”

Gordon Edge, RenewableUK’s director of policy, said that until now, Levy Exemption Certificates generated as a result of the CCL had provided vital financial support for renewable energy producers.

He said: “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.”

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