Tax rise angers energy groups

The Sunday Times
May 17, 2009
Danny Fortson

THE wind industry has accused the government of “sabotage” over a proposed fourfold tax increase that could lead to the scrapping of up to half Britain’s 150 onshore projects.
The hike has infuriated energy groups, which are warning of a wholesale retreat from the struggling sector just weeks after the government unveiled a package of aid measures designed to support it.
In a letter seen by The Sunday Times, Eon accused the government of “giving with one hand and taking with the other”. Infinis, the renewable-energy group owned by Guy Hands’s Terra Firma, said the changes would “amount to between 40% and 50% of [its] portfolio not proceeding past the consent stage”.
Every five years the Treasury’s Valuation Office Agency (VOA) resets business rates. Its latest proposal would raise rates from next April from £5,000 per megawatt to £20,000 per megawatt.

Business rates make up about 5% of an onshore wind farm’s running costs, which under the proposal would increase to about 20%, rendering many of the 150 projects planned in Britain unviable. Offshore farms are exempt.
The dramatic difference in rates is due to the inclusion by the VOA of the per-megawatt subsidies that the government has introduced to encourage investment. A spokesman for the BWEA, the industry lobby group, said: “We won’t be able to deliver on the government’s targets if schemes are no longer profitable.”