The proposed 50% income tax rate may be grabbing all the headlines but the energy and renewables sector fared better than most in yesterday's Budget. The Chancellor announced a number of measures which are of relevance and succour to the sector, mostly in the form of financial support. The measures complement the UK's first ever carbon budget, under which the UK is now committed to cutting emission of greenhouse gas emissions by 34% by 2020, towards the long-term goal of an 80% cut by 2050.
The key measures announced are:
- £405 million to support low-carbon industries and advanced green manufacturing, to help make the UK a world leader in those sectors.
- Up to £4 billion of new capital from the European Investment Bank to be made available to UK energy and renewable projects by direct lending to the projects themselves and also through intermediary bank funding. The intention is that these funds should remove blockages in energy project financing.
- An increase in support for offshore wind projects currently being undertaken. This will be achieved through an uplift in ROC banding and is intended to ensure that the UK remains an attractive destination for investment. The support will be available provided that the project meets certain completion obligations. This is worth £525 million from 2011 to 2014 and, it is claimed, is expected to support £9 billion of investment and to produce power for up to 2.8 million homes.
- Support for combined heat and power through an extension of the climate change levy exemption for indirect sales of CHP electricity to 2023, subject to State Aid approval and a commitment to continue other existing exemptions from the climate change levy for CHP. It is intended that this should bring forward £2.5 billion of investment and 3 GW of capacity by 2015.
- An intention to enable delivery of up to four carbon capture and storage demonstration projects, with £90 million of funds to be made available to enabled detailed preparatory studies into CCS to be undertaken.
These measures should be broadly welcomed by the energy and renewable sector. They are clearly aimed at protecting the UK's position as a leader in the field of energy and renewables technology and energy provision.