UK: no budge on solar tax breaks in Budget

Hopes were certainly not high for the U.K.’s solar industry ahead of today’s Budget, and Conservative chancellor Phillip Hammond stuck true to form by denying solar access to tax breaks so readily and regularly given to the country’s fossil fuel industry.

Ahead of the today’s Budget – which sets out government spending on all areas of the economy for the next 12 months – the Solar Trade Association (STA) had reiterated that it was not pursuing new subsidies for solar; rather that the technology be given a level playing field in terms of market access and tax treatment.

Such modest asks included adding solar panels and energy storage to the eligibility list for Enhanced Capital Allowances, the establishment of a subsidy-free Contracts for Difference (CfD) auction mechanism for mature technologies such as large-scale solar; a reclassification of rooftop solar panels as “Excepted Plant and Machinery”, thus placing them under a lower tax bracket, and the retention of a carbon floor price plus details of carbon pricing scales out into the 2020s.

One of the STA’s strongest arguments was for the current 5% VAT rate applied for storage installed alongside new solar to be extended to batteries added to older solar systems – of which the U.K. has more than 875,000 eligible installations.

However, few of these proposals were listened to by the Chancellor, who was accused by the STA of “bending over a North Sea barrel” in his efforts to offer more tax breaks to fossil fuels.

“It isn’t right that solar is being put at a disadvantage in the U.K.,” said STA head of external affairs Leonie Greene. “The Budget states that apart from honouring existing commitments, there will be no new public support for renewables that lead to an increase in consumer bills, until 2025.”

The irony here is that the Budget came on the same day that it was revealed that the controversial Hinkley Point nuclear plant will cost an additional £25 billion more than first calculated – equating to an extra £15 a year on a typical household’s energy bill.

Seb Berry of Solarcentury took to Twitter to say how ironic it was that Hinkley’s costs have been rightly slammed by MPs, but the government then announced that “no new levies for much cheaper renewables” will be forthcoming until at least 2025.

The STA also criticized the lack of an increase in carbon pricing – a decision that Greene says means there is “no clear long-term signal for investors”, particularly those keen to support low carbon power development.

Greene added: “The STA believes solar can win effectively subsidy-free clean power (CfD) contracts today, so we now hope to see clean power auctions for established technologies resume on that basis.

“The Chancellor still has an opportunity to take a small step in the right direction by including solar under the eligible technologies list for Enhanced Capital Allowances in the Finance Bill, when it goes to the Commons.”

Commenting on the Budget, James Court, Head of Policy and External Affairs at the Renewable Energy Association said: “The U.K. government seem to be turning their back on renewables by announcing no new support for projects post 2020 and a freeze on carbon taxes. This could see a hiatus in much needed infrastructure development. Considering this is coming only a couple of months after the much vaunted Clean Growth Plan, it’s hugely disappointing.

“The Chancellor talked about embracing the future in his speech, yet hid away the details that he was blocking all renewables to market. Onshore wind and solar are already cheaper than new build gas, and we have seen huge cost reductions happening in offshore wind, energy from waste and biomass. These are the technologies of the future and the Government should be backing them, not blocking their progress.”