Developer calls for tax relief for renewables and batteries

The executive chairman of Anesco has called for tax relief for renewables and batteries to help make up for the loss of multiple potential revenue streams.

The Renewables Obligation has been closed to new applicants for several years and onshore wind and solar have been excluded from the Contracts for Difference auction since the first took place in 2015.

Batteries have also saturated the frequency response market and have fared poorly in the capacity market since the de-rating factors were drastically reduced.

Anesco executive chairman Steve Shine has urged the government to provide or resume a series of tax breaks to help replace this lost income.

Since 2016, energy generation has been excluded from the Enterprise Investment Scheme (EIS) which offers to tax breaks to investors in high-risk start-ups. The Treasury said energy generation is not risky enough to justify its continued inclusion.

But Shine told Utility Week this is not the case: “Since subsidies were removed from solar, there are no long-term contracts. Yes, you can secure long term power purchase agreements, but their value doesn’t justify investment in new assets. They offer too low a return for investors, who see the bigger risk of merchant power and aren’t willing to take it.

“In the case of batteries, they have never had subsidies and that’s not what we’re calling for. The reality is nobody is investing in them as the returns are so low and the risks are so high – yet batteries are exactly the type of asset that should be supported by EIS and that we need if the UK is to move to a cleaner energy system.”

He continued: “People have stopped building storage as investors won’t touch it. The only ones able to move forward now either secured long-term contracts some years ago or have received subsidies from innovation funds.

“The Treasury talks about long term revenue streams, but at the present time the contract on storage assets is one month, soon going down to one week, and then to just one day.

“We’d be very happy if there was a secure revenue stream, but one simply doesn’t exist.”

Shine also called for tax relief for farmers, who provide the vast majority of prospective sites for Anesco.

Farmers are currently able to average their profits over a period of two or five years, allowing them to offset profits in one year against losses in another and thereby lower their tax bill.

But this only applies to farming revenues and not the rental payments they can earn for hosting wind and solar farms on their land.

They, and other landlords, may also disqualify themselves from inheritance tax relief on the land on which the assets are sited.

Shine said these arrangements are deterring farmers from opening up their land to renewables and called for them to change.

Jonathan Scurlock, chief climate change and renewables advisor at the National Farmers Union welcomed the suggestion, noting that farmers are able to receive tax relief on revenues from the production of energy crops.

He said extending these benefits to renewables and batteries would help achieve the government’s net-zero target.

“As the government moves away from direct subsidies for infant industries in renewables towards recognising that renewables are able to compete on their own merits, the tax system should nevertheless be tilted in favour of investments in clean energy because the government’s got a big task,” he added.