The UK's net-zero goal is at risk because the government lacks a clear plan to deliver green growth, energy sector bosses have warned.

In a letter to the Chancellor Jeremy Hunt, five trade associations representing 750 companies and organisations say that tax breaks to encourage investment in green energy are needed to prevent Britain losing out to the United States and the European Union.

They say decisions on “many” clean energy projects are being delayed as supply chain companies are hit by inflationary pressures and the energy crisis.

The chief executives of RenewableUK, Energy UK, the Nuclear Industry Association, Scottish Renewables and Solar Energy UK have co-signed the letter to Mr Hunt urging him to use the spring budget to introduce new investment tax relief.

'No clear plan'

“Despite our industry’s commitment to the low carbon energy transition, we are concerned that there is no clear government plan to deliver green economic growth and continue attracting clean energy investment into the UK," it states.

It highlights a perfect storm of inflation, unfavourable exchange rates and the rising costs of raw materials and labour which are pushing up prices across all parts of the economy - including clean power sector where the levelised cost of energy has increased by 20% globally in the past year.

As a result, many project developers and supply chain companies which were already operating within very small margins are now finding that profits are disappearing completely.

Incentives

The trade associations are calling for key steps in the Spring Budget to address this, including a reform of capital allowances, and financial incentives for investment in low carbon energy in response to those being offered by the US in its $216billion Inflation Reduction Act and the European Union in its REPowerEU package.

The letter states that: “With many clean energy projects already delaying Final Investment Decision (FID) and supply chain companies squeezed by the energy crisis and inflationary pressures, a tangible step like enhanced capital allowances announced in the Spring Budget will do more to persuade investors than the promises of a future plan for economic growth”.

The letter highlights the fact that the UK has created an Energy Profits Levy with 91% investment relief for oil and gas, but an Electricity Generators Levy with 0% relief for clean power generators. It urges the Chancellor to address this in his Spring Budget by including an investment allowance in the Electricity Generators Levy to level the playing field with fossil fuels as part of a wider reform of our capital allowances regime, to preserve the UK’s international competitiveness.

The letter to the Chancellor concludes: “Any delay or shortfall in ambition will mean that our climate targets, and the economic opportunities they offer, will be increasingly hard to realise. Time is against us and we cannot afford to get this wrong”.

Intervention is 'critical'

Scottish Renewables CEO Claire Mack added: “The clean energy sector is one of the UK’s most dynamic and fastest-growing industries, and, with the right policy support, will be the means to revitalise our economy. However, with widespread uncertainty and increasing international competition, the UK’s status as a leading destination for investment in clean energy is at risk.

"It is therefore critical that the Spring Budget is used to reform our capital allowance regime to maintain the UK’s position at the forefront of the clean energy transition. Any delay, and other places in the world will benefit from the unparalleled economic and environmental benefits that clean energy investment promises to deliver whilst the UK misses out”.

A Treasury spokesman said: “We are taking significant action to encourage investment in renewable generation, including committing £30 billion to support the domestic green industrial revolution.”

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