Industry leaders are cautioning that windfall taxes are driving up the expenses of green energy projects by up to 50%, causing international investors to become apprehensive about a profit raid.
According to Energy UK, the industry trade body, a windfall tax on renewable energy generators and regulatory inconsistency are significantly raising costs and damaging Britain’s standing among private investors.
The association has warned in a report that the investment climate for low-carbon generation in the UK has taken a substantial hit recently due to factors such as inflation, rising interest rates, supply chain issues, and heightened foreign competition.
The report additionally noted that a poorly planned windfall tax has produced immediate worries about the feasibility of new clean energy projects, especially in the realm of renewables. As a result, new low-carbon generation is facing a knock-on effect of overall expenses increasing by a significant 20-30%, with specific projects reporting cost increases of up to 50%.
In November’s Autumn Statement, Chancellor Jeremy Hunt announced a windfall tax levy on electricity generators, which included targeting the “excess” profits of renewable and nuclear energy generators. The Treasury defended its decision at the time, stating that renewable and nuclear energy electricity generators were making exceptional returns due to being able to sell electricity at a price set by the cost of gas generation without exposure to rising gas input costs.
However, Energy UK has reported that over the past year, political and regulatory instability has led to market unease and a “serious deterioration” of the UK’s low-carbon infrastructure investment environment. The association has cautioned that a combination of global and domestic factors has raised questions about investment in the UK and could lead to an investment hiatus that risks the country falling short of its targets, harming both the environment and the economy.
Last week, Tom Glover, the UK boss of RWE, one of Britain’s biggest power producers, claimed that Mr Hunt’s windfall tax, coupled with a lack of a clear growth strategy, had jeopardized the company’s investment plans in the UK. Emma Pinchbeck, chief executive of Energy UK, has warned that the UK is at risk of failing to meet its commitments and is putting its own ambitions in jeopardy by driving investors to look elsewhere.
She has also stressed that this is a crucial time, with other countries actively competing to attract the same investors and companies, and failing to take action could lead to missing out not only on cleaner, less expensive energy but also on the significant boost that investment could bring to the economy in terms of growth and job creation.
