The decision to remove renewable energy sources from the Climate Change Levy (CCL) exemption will have a negative impact on the country’s renewable sector, according to a research and consulting firm.
GlobalData said that while the move is expected to generate around £490million by 2016 and up to £1billion per year by 2020, the energy sector will suffer as a result in the short term.
However this negative affect is likely to help growth in the long term – but areas such as the UK’s wind sector the hardest in the immediate aftermath of the decision.
GlobalData believes that other renewable technologies with high capital costs, such as biopower, could also be affected, while subsidies for solar power are currently under review.
Prasad Tanikella, GlobalData’s senior analyst covering power, said: “In the short term, the government’s latest move to phase out the Renewables Obligation and impose CCL on renewables will certainly discourage investment in the sector.
“However, it is expected that ending the levy exemption will generate around £490 million during 2015-2016 for the government, increasing to £1 billion in 2020-2021.
“UK wind power currently has a pipeline of over 43 GW, around 12.5 GW of which is onshore and the remainder is offshore wind.
“The UK’s current offshore wind capacity is around 4.5 GW and over 1 GW is expected to come online this year.
“Even in current circumstances, it is anticipated that the country will add around 1 GW each year over the next five years.”
“The Department of Energy and Climate Change is considering closing subsidies for some small-scale solar farms by 2016. The government’s decision to abruptly discontinue subsidies will dent investor confidence and slow down investments in the industry,” the analyst concludes.”