Government

Summer Budget will cost Anaerobic Digestion industry £11m

The Anaerobic Digestion and Bioresources Association (ADBA) has calculated that one of the measures included in the Summer Budget could cost the anaerobic digestion (AD) sector £11 million.

The Budget, presented yesterday (8 July) by Chancellor of the Exchequer, George Osborne, removed the Climate Change Levy (CCL) exemption on renewable electricity sources, effective from 1 August.

This, says the ADBA, will reduce revenue by around £5 per megawatt hour (MWh). The AD industry in the UK currently generates 2.2 terawatt hours (TWh) of electricity, adding up to a figure of £11m lost revenue a year, which the industry trade association says will greatly impact investor and operator confidence.

The CCL was introduced in 2001 to improve industrial and commercial energy efficiency and thus reduce greenhouse gas emissions. It is a UK-wide tax on the supply of energy to businesses and the public sector, with separate rates for electricity, gas, solid fuels and liquefied gases depending on their energy content.

An exemption for renewable sources was introduced alongside the levy to increase demand for renewables from business consumers.

Reasoning in the Budget document for the removal of the exemption reads: ‘Without action the exemption would cost £3.9 billion over this Parliament.

‘This change will correct an imbalance in the tax system by preventing taxpayers’ money benefitting renewable electricity generated overseas, and by helping ensure support for low carbon generation provides better value for money for UK taxpayers.’

Summer Budget will cost Anaerobic Digestion industry £11m

Reasoning for exemption removal ‘misleading’

But Charlotte Morton, Chief Executive of the ADBA called this claim ‘misleading’, asserting that only a third of the CCL goes to overseas providers of renewable electricity.

She said: “The rest of the levy is currently spent supporting the UK’s renewable electricity market at around £5 per MWh, which developers took into account when putting their business models together.

“Without the exemption for renewable sources, the AD industry will lose £11 million in revenue each year – hurting existing operators and putting further investment at risk.”

Friends of the Earth renewable energy campaigner Alasdair Cameron has also criticised the decision to remove the exemption, saying: “Making renewable electricity pay a carbon tax is ridiculous and completely counterproductive – like making apple juice pay an alcohol tax.

 “The Chancellor constantly talks about making decarbonisation cheaper, and he then makes it more expensive, using a tax which was originally designed to encourage clean energy.

“If there are problems with renewable companies which might not be low carbon – like some biomass projects – they can be dealt with separately, but this blanket approach will only create more uncertainty, costing clean energy jobs and investment.”

Decision adds to standing ADBA concern about government support for green economy

Morton also criticized the Budget for not supporting the green industry to help drive economic growth, particularly through the lack of confirmation that the Renewable Heat Initiative (RHI) will be extended beyond March 2016.

“ADBA’s latest market report demonstrates that the number of biomethane plants has tripled between 2014 and 2015, there are unlikely to be any new biomethane plants without signalling an extension to the RHI budget.

“The UK needs renewable energy to keep the lights on and meet climate change targets.

“Without additional biomethane capacity the AD industry will be unable to contribute to the EU Renewable Energy Directive target of 12 per cent heat from renewable sources by 2020.

“Home grown green gas can potentially meet as much as 30 per cent of the UK's domestic gas demand - reducing our dependence on imported natural gas from Qatar and Russia - or fuel around 80 per cent of heavy goods vehicles (HGVs)

“We are deeply disappointed that the industry was not consulted on this decision and remain concerned about the government’s real support for the green economy.”

Read the Summer Budget decision on the Climate Change Levy.

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