Community Windpower, the company developing the 308MW Sanquhar II wind project in Scotland, has expressed concern about the rising costs of renewable energy projects in the UK. The company has revealed that the cost of the Sanquhar II project has increased by £200 million to more than £500 million. This increase in costs is due to inflation, rising interest costs and fluctuations in the value of the pound.
However, rising costs are not the only concern for the industry. The imposition of the Electricity Generator Levy (EGL), also known as the windfall tax, imposed by the UK government, has raised further concerns. Introduced in the autumn of last year, the EGL imposes a 45% tax rate on profits above £75MW/h generated by new renewable energy plants. Interestingly, gas generators are exempt from this tax.
Community Windpower managing director Rod Wood believes the windfall tax is a “total policy failure”. It argues that the tax makes investment in projects such as Sanquhar II unviable, as the break-even point for such projects is £90MW/h. As a result, it warned that the UK is unlikely to see new commercial wind projects built by 2030.
The windfall tax has also raised concerns over other planned UK wind projects, including Community Windpower’s 315MW Faw Side project. Wood estimated that the tax would prevent the development of around 20-30GW of commercial wind capacity, resulting in the loss of £30-40bn of investment and thousands of jobs in the green industry sector.
In response to these challenges, Community Windpower and others in the industry are calling for new renewable energy projects to be exempt from the wind tax. They also advocated a termination clause for the tax before December 2023, in line with Ireland and the European Union. In addition, they recommend the implementation of investment incentives for the sector, similar to those provided in the oil and gas industry.