Source · Select Committees · Business and Trade Committee
Recommendation 9
9
Deferred
Paragraph: 51
Equalise investment allowance rates for low-carbon electricity developers with oil and gas sector.
Recommendation
Providing that oil and gas companies utilise their investment allowances included in the Energy Profits Levy, oil and gas extraction will continue to benefit from a lower effective rate of marginal tax than low-carbon developers. This risks offering perverse incentives to investors. We recommend that when investing in low-carbon electricity technologies, developers should receive an investment allowance rate equivalent to that received by the oil and gas sector. We further recommend that the Government revisits the case for Voluntary Contracts for Difference for low-carbon electricity generators currently subject to the Electricity Generators Levy.
Government response summary AI-generated
The government's response discusses local decision-making for onshore wind sites and a consultation on changes to the National Planning Policy Framework, failing to address the recommendations regarding investment allowance rates for low-carbon developers or Voluntary Contracts for Difference.
Summary of the government's response below — read the verbatim text to verify.
Paragraph Reference:
51
Government Response
Deferred
HM Government · verbatim extract
Deferred
13. [Response provided by HMT] The Government continues to provide considerable support for investment in renewables. Since March 2021, the Government has committed a total of £30 billion of domestic investment for the green industrial revolution. 14. As the committee notes, investors in low-carbon technology are able to deduct the costs of investment from their Corporation Tax liabilities. At Budget 2023, the Government introduced Full Expensing, which allows companies to write off 100% of the cost of qualifying main rate plant and machinery in the year of investment until March 2026. Companies investing in special rate (including long life) assets will also benefit from a 50% first-year allowance during this period. 15. The Electricity Generator Levy is an exceptional and time-limited measure, which has a fundamentally different design to the Energy Profits Levy applied to the oil and gas sector. 16. The EGL has been designed to leave generators with a share of the upside they receive at times of high wholesale prices which they can use to invest in the clean energy generation we need for the future. 4 Decarbonisation of the power sector: Government Response 17. Under the Energy Prices Act 2022, the Government took powers to allocate Contracts for Difference (CfDs) to operational low-carbon generators. 18. The Government is undertaking further work to consider whether this could help to limit consumer bills and support investment in low-carbon generation. The option to offer a CfD to operational generators is one of a series of options being assessed as part of the wider Review of Electricity Market Arrangements (REMA) in DESNZ. An update will follow in due course. 19. [Additional Input by DESNZ] Instruments like the Contracts for Difference (CfD) scheme make the UK an attractive place to invest in green industries. Over the last decade, the UK has developed a tremendous record for attracting investment into green industries through a range of financing mechanisms, policy and market frameworks and targeted public investment, and we are determined to build on this. Routes to managing electricity supply and demand
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