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BWEA/RPA/SRF Press Release

Wednesday 26th January 2005

Government action on renewables undermines fine intentions on climate change

While the Prime Minister lectures his G8 colleagues in Davos on climate change, his own Government is sabotaging fragile growth in the UK's renewable energy industry. New business rates set by Mr Prescott's department will raise bills for green generators by up to 700%, while rates for nuclear and fossil fuel plants are set to fall dramatically.

Trade Associations representing the sector are exasperated by this measure.

"This is another nail in the coffin of the Government's renewable energy targets," said Philip Wolfe of the Renewable Power Association. "We have been urging the Department of Trade and Industry, which is responsible for renewables, to work with the ODPM's business rates department to find a sensible solution".

Marcus Rand of the British Wind Industry Association confirms that the industry had contacted ministers in both departments.

"This seems a classic case of un-joined-up Government. We will be seeing a ridiculous situation where with one hand the Government is giving financial support to renewables while with the other it is taking some of that support away", he said.

Commenting on the situation in Scotland, Maf Smith, Chief Executive of Scottish Renewables Forum said,

"This decision exposes the 'push-me pull-you' conflict within Government. If renewable targets for Scotland are to be met, we need consistency across Government and support instead of obstruction".

This extraordinary situation arises from the way in which rates will be calculated from April. The formula used by the Valuation Office makes rates proportional to the receipts of each plant. In the case of renewable generators this includes the incentive payments for sustainable energy sources. Since 2002 all electricity consumers have been paying a small proportion of their bills to support renewable power. Now the Government will effectively be taxing these incentive payments through the rating system.

The industry estimates that the change will inhibit development of wind power by about 33%. The effect on many other renewables technologies will even more acute, says Wolfe, predicting that new biomass energy developments would be "stopped in their tracks".

"We have been pressing the Government for a range of positive actions needed to make their 10% target for 2010 achievable", he said. "Instead they seem to be putting barriers in our way".

For more information contact:

Renewable Power Association

Philip Wolfe, Chief Executive
07971 786417

Gaynor Hartnell, Director of Policy
020 7747 1832

British Wind Energy Association

Marcus Rand, Chief Executive
020 7689 1960
or
Alison Hill, Head of Communications
020 7689 1966

Scottish Renewables Forum

Maf Smith, Chief Executive
0141 249 6705

Notes:

  • The new business rating system is being adopted for all businesses in Great Britain and runs from 1st April 2005 for a period of five years, when it will be reviewed again. Business rates are assessed by the Valuation Office (VO) responsible to the Office of the Deputy Prime Minister (ODPM). Nick Raynsford is the Minister responsible.
  • Rates for all generating stations were previously assessed on a so-called 'prescribed formula' whereby they were set at a fixed uniform level per megawatt of capacity. The new system assesses each site individually using the 'receipts and expenditure' method, where the ratable value is calculated as a percentage of the notional profit of the plant calculated by subtracting its expenditure from its income. The income from Renewable Obligations Certificates has been included.
  • Renewable Obligations Certificates are the 'currency' of the Renewables Obligation introduced in 2002. Under this scheme electricity suppliers are required to purchase a certain proportion of their power from renewable sources. The additional cost is generally passed on to consumers and was intended to act as an incentive to increase the level of renewable generation.
  • The Government has set a target of 10% of electricity from renewables by 2010. At present the UK is near the bottom of the world league of sustainable energy producers, sourcing about 4% of our electricity from renewables.
  • Rates are assessed for generating stations on a site-by-site basis and the rises therefore vary. Based on the preliminary assessments issued by the VO, the maximum increase for wind generation stations was 708% and the average about 100%. The maximum increase for biomass plants was 145%, while hydropower suffered one increase over 1000% with the others up to 650%.
  • Renewable energy from biogas from landfill sites is to be assessed on an entirely different basis (known by the VO as the 'contractors basis'). The level of change here is still under discussion.