Analysts and experts in the renewable energy sector have highlighted the shortcomings of the UK’s renewable energy generator tax. The Electricity Generators Levy (EGL), implemented by Chancellor Jeremy Hunt, imposes a 45% tax on renewable energy generators from 2023. However, there are concerns that this tax is hindering the development of renewable energy and undermining zero emissions government target.
The EGL structure has received criticism for undermining investor confidence and reducing the potential for new investments. Stifel analysts described it as an example of state interference in the investment landscape. The unintended consequence of taxing renewable energy is that it makes investing in renewable energy projects less attractive.
The EGL was introduced as a means of funding the domestic energy price guarantee and is expected to generate £4.1 billion in revenue until April 2024, and a total of £14.2 billion between 2023 and 2028. However, it whose predictions appear more optimistic in the light. to the decrease in energy prices last year.
Critics argue that the 45% tax rate appears high compared to other corporate tax rates, and the duration of the tax until 2028 is considered a long-term burden on investors. They suggested that the Treasury could explore alternative mechanisms, such as a tax on payments over a 10-year period, to finance the price of the relief package for consumers.
The renewable energy industry is also claiming a reduction in investment similar to that associated with the windfall tax on oil and gas. This will allow companies to deduct a portion of their tax bill based on the amount spent on new production.
To encourage greater investment in renewable energy, the government may need to reconsider the structure and impact of the EGL. This may include changes in the tax rate, the duration of the tax and the introduction of investment deductions. These changes will address concerns raised by analysts and industry experts, promote investor confidence and support the achievement of the government’s zero emissions targets.
