Industry warns Chancellor that green growth is at risk unless he prioritises vital Budget measures
Five energy trade associations representing over 750 companies have written a joint letter to the Chancellor Jeremy Hunt warning him that the competitiveness of the UK as a clean energy investment destination is at severe risk unless he takes key steps in the Spring Budget to secure green growth.
In the letter, the Chief Executives of RenewableUK, Energy UK, the Nuclear Industry Association, Scottish Renewables and Solar Energy UK warn the Chancellor that: “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”.
It highlights a perfect storm of inflation, unfavourable exchange rates and the rising costs of raw materials and labour which are pushing up prices across all parts of the economy - including clean power sector where the levelised cost of energy has increased by 20% globally in the past year. As a result, 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 are calling for key steps in the Spring Budget to address this, including a reform of capital allowances, and financial incentives for investment in low carbon energy in response to those being offered by the US in its $216 billion Inflation Reduction Act and the European Union in its REPowerEU package. The letter states that: “With many clean energy projects already delaying Final Investment Decision (FID) and supply chain companies squeezed by the energy crisis and inflationary pressures, a tangible step like enhanced capital allowances announced in the Spring Budget will do more to persuade investors than the promises of a future plan for economic growth”.
The letter highlights the fact that the UK has created an Energy Profits Levy with 91% investment relief for oil and gas, but an Electricity Generators Levy with 0% relief for clean power generators. It urges the Chancellor to address this in his Spring Budget by including an investment allowance in the Electricity Generators Levy to level the playing field with fossil fuels as part of a wider reform of our capital allowances regime, to preserve the UK’s international competitiveness.
The letter to the Chancellor concludes: “Any delay or shortfall in ambition will mean that our climate targets, and the economic opportunities they offer, will be increasingly hard to realise. Time is against us and we cannot afford to get this wrong”.
Scottish Renewables' Chief Executive, Claire Mack commented: “The clean energy sector is one of the UK’s most dynamic and fastest-growing industries, and, with the right policy support, will be the means to revitalise our economy. However, with widespread uncertainty and increasing international competition, the UK’s status as a leading destination for investment in clean energy is at risk. It is therefore critical that the Spring Budget is used to reform our capital allowance regime to maintain the UK’s position at the forefront of the clean energy transition. Any delay, and other places in the world will benefit from the unparalleled economic and environmental benefits that clean energy investment promises to deliver whilst the UK misses out.”
RenewableUK’s CEO Dan McGrail said: “If the UK is to stay ahead in the global race for clean energy and drive consumer bills down, we need the Chancellor to adopt bold measures in the Spring Budget to retain and boost private investment in the energy transition. The significant threats which the renewable energy sector faces are putting at risk our ability to deliver green growth and meet the Government’s vital Net Zero target. 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."
Energy UK CEO Emma Pinchbeck commented: "The investment climate for UK low carbon generation has worsened over recent months. Increased costs and renewed international competition risk squandering the UK's lead as a clean technology pioneer. Government must - at the very least - reform the capital allowances regime to keep investment and industry here in the UK; we need this low carbon infrastructure to power our economy cheaply and get bills down in the long run."
Tom Greatrex, Chief Executive of the Nuclear Industry Association, said: “The future of our energy system is at a critical point that requires both vision and urgent decisions. Otherwise, we risk falling behind on ensuring energy security and continuing progress towards net zero. The UK’s civil nuclear industry is ready, willing and able to be part of delivering jobs, investment and a cleaner, more secure power mix. Clarity from government on the programme will help bring the investor confidence for the UK to make real strides. Without it, the risk is that a massive economic, security and environmental opportunity is missed."
Solar Energy UK CEO Chris Hewett said: “Although the underlying economics of the power sector have now moved decisively in favour of renewables and there is a global race for net zero technologies, it is perverse that the UK government is still tilting the playing field in support of high carbon energy. The Chancellor must use the Spring Budget to allow investors in renewables the same tax relief that is available to oil and gas companies."
The letter is available here in full.