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Chancellor George Osborne is expected to balance the widely anticipated tax cuts for the offshore oil and gas industry with a boost for the development of the UK's tidal power prospects in his Budget Statement this afternoon.
He is widely expected to back the £1 billion Swansea Bay tidal lagoon project in today’s Budget, as well as announcing tax breaks for the offshore oil and gas sector and that there will be a review into distribution charges.
The treasury has been in talks with Tidal Lagoon Power, the company behind the plans for the £1 billion renewable energy project, and, according to The Guardian, it will be offered the chance to discuss what level of support it needs under the contracts for difference (CfD) regime. It is thought the initial level of support for the project will be £150/MWh.
The Swansea Bay Tidal Lagoon project, which received funding of £200 million in February, will act as a scalable forerunner to a project in Cardiff and is due to begin construction in the summer.
The Swansea Bay project is expected to have a capacity of 320MW for up to 120 years, and could connect to the National Grid by 2018.
The chancellor is also set to pledge to “urgently consult” on plans to cut electricity distribution charges in Scotland. This could result in household bills in the north of Scotland being cut by around £30 per year. Transmission charges in northern Scotland are higher because the network crosses rural and remote locations, and is further away from centres of high demand.
Osborne is also expected to give the offshore oil and gas industry a tax break and reduxce the 30 per cent supplementary tax charge on North Sea profits. He is also set to announce an investment allowance that could cut taxes on some scheme from 60 per cent down to 30 per cent.
IHS Global Insight chief UK economist Howard Archer said: “This would help to limit the number of oilfields that are becoming uneconomic and protect production.”
The cuts would be especially welcomed by utility giant Centrica which is the largest single player in the offshore oil and gas industry and has seen its share prices and profits tumble over the last year, although this has rallied over recent days on the rumours of an imminent tax break.
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