What the Summer Budget means for Green energy Production
Green Energy Production
The Summer Budget set out by the Chancellor of the Exchequer, George Osbourne, just three weeks ago is likely to have a radical effect on energy producers across the country, none more so than those looking to supply renewable power. The Chancellor has announced that renewable energy generators will no longer be exempt from the Climate Change Levy (CCL), removing a subsidy payment to renewables that equates to more than £5 for every unit of energy.
It is estimated that this benefit is currently worth around £450m to renewable energy producers and that by 2021 they will be looking at a substantial loss of anywhere up to £1bn as a result of the changes. The repercussions of such changes have drawn the attention of renewable promoters Greenpeace, RenewableUK and the Green Party, who each claim that the Chancellor is ‘out of step with the times’. In reply Mr Osbourne described the subsidy as ‘out—dated’ and stated that since its introduction in 2001 the treasury had seen very little value from it.
Although the Conservative government are still claiming to be committed to promoting low carbon investment, the removal of the CCL exemption for green energy producers is likely to put a serious dent in the industry and could well encourage companies to move away to cheaper, less sustainable alternatives. Share prices have already plummeted for many of the country’s leading renewable sources, including biomass burners Drax, who fell by more than a quarter after the announcements.
Onshore wind is a form of energy that has already taken a hit, with the government ending all future financial support for what is considered the cleanest and most cost-effective form of energy produced. With the removal of the CCL subsidy too, it now seems likely that the sector will collapse completely, especially when considering that the changes are retrospective. This will mean that projects already underway will suffer, with CCL payments immediately due.
What this means for businesses is a choice between cheap, unsustainable fossil fuels or renewable energy that helps to reduce carbon emissions. For most this is likely to be a difficult decision, especially as support for renewable energy will no longer exist and investment in the industry is likely to suffer as a result. Yes, the treasury is likely to see hundreds of millions of pounds back in the bank, but this is very unlikely to trickle down into the consumer’s pockets, and will do even less for climate change as a whole.
So how will the change affect your energy buying decisions? Is Mr Osbourne right to cut the levy and level the playing field for both renewables and fossil fuels, or has he effectively decimated the green sector and set the country back in its climate obligations? Perhaps only time will tell.