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Renewable energy loses Climate Change Levy (CCL) exemption

The recent budget confirmed the removal of the Climate Change Levy (CCL) exemption for renewable electricity. The implications for SMEs are significant.

The budget was marked by substantial cuts to government spending to move towards the aim of eliminating the deficit. While the reductions in benefits attracted the most attention, changes to the renewable energy market could have more impact on small to medium sized businesses.

Renewable sources of energy and the CCL

Renewable source electricity (RSE) will be liable for the Climate Change Levy (a tax on energy delivered to non-domestic users in the UK) after Levy Exemption Certificates (LECs) are dropped (although there is no timetable). Power generated by wind, solar or other sustainable sources will be more expensive, with the increases in price likely to be passed to business customers. You can find more of the detail in the official government document.

Some observers see this as a necessary reduction in expensive subsidies: the Chancellor said the removal of the exemption will earn the Treasury £450 million in 2015/16, rising to £910 million in 2020/21. But others complain that the move sets back the UK’s journey to becoming a low-carbon economy, especially as the government has been supportive of fracking and has lowered taxes on North Sea oil and gas.

RenewableUK, the trade association representing the wind, wave and tidal energy industries, is one of the critics. Its Director of Policy, Dr Gordon Edge, called it “a punitive measure for the clean energy sector” that undermines “vital financial support for renewable energy producers” and constitutes “another example of this Government’s unfair, illogical and obsessive attacks on renewables”.

“We’re suddenly looking at a substantial amount of lost income for clean energy companies which was totally unexpected,” Edge added. “Levy Exemption Certificates account for just over 6% on onshore wind generators’ revenues.”

Cheaper, greener business energy

While generators fret about projects slipping into unprofitability, there may be an unexpected silver lining for small to medium sized companies. As suppliers scramble to find customers for their renewable sourced electricity, there are eye-catching discounts on green energy, at least in the short term.

For SMEs looking to ‘go green’ there has never been a better time. Even those more motivated by price might be surprised by how much cheaper electricity rates have become. For a fast expert overview of your options just fill in the form at the top right of this page or call 0330 0100 251. You could be getting cheaper, greener energy in just 20 minutes.

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