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Solar perspectives on UK emergency Budget 22 June 2010.
Barry Johnston, MD of Solar heating business Solar Twin Ltd heard George Osborne pledge to “balance the books” in today’s emergency budget – and asks:
“Was it balanced regarding renewable heat energy? Was the nation’s carbon budget balanced? What about the Renewable Heat Incentive? Why the silence?
The Prime MInister has already pledged to make this the greenest government ever and to reduce the Government’s own emissions by 10% for 2010/2011 – but the only mention of energy and climate change related issues in the speech itself was confirmation by the Chancellor of intentions to form a Green Investment Bank designed to help finance low carbon and renewables projects and sets out the UK’s need for £200 billion of investment to 2020 to provide secure low-carbon energy.
The budget delivered little in the way of surprises for energy policy. Despite expectations from the energy sector of formal news on starting the Renewable Heat Incentive (the proposed RHI would subsidise, for decades, users of solar heat in the same way that generators of solar electricity are currently hugely subsidised) unfortunately no announcement on RHI was made.
We hope that the lack of an announcement on RHI in the Budget not a cause for concern. Perhaps on a day in which substantial pain has been delivered to the economy, it would have been a risky move for any chancellor to have proposed policy measures which promise to further increase energy bills, especially as the RHI is not yet fully costed.
This article comments on some of the government’s claims – from the perspectives of solar energy consumers and solar energy businesses. To quote George Osborne’s 22 June budget speech.
Is the 2010 emergency budget “enterprise led”?
No – seemingly not – from the perspective of the way it (a) hammers DIY solar heating and (b) still subsidises domestic energy wastage as described below.
However the proposed “Green Investment Bank” and “Enterprise Finance Guarantee Scheme” may be of value. Let’s see what happens when these are announced later in the year.
Is the 2010 emergency budget “fair”? and Does the budget make “hard choices”?
No and no. Not from the perspective of the DIY green energy market. The problem is that domestic fuel is being taxed at only 5% VAT rate. The government dodged the pressing imperative to tax high carbon polluting fuels more than green alternatives. Instead they postponed a difficult decision which is that domestic fuels are still undertaxed and so in effect, waste is being subsidised.
The government’s failure to tax domestic fuel acording to its global warming emissions is deplorable. The proposed January 2011 increase in VAT to 20% further widens to 15% the gulf between the 20% VAT paid by DIY solar installers and the polluting fuel which they buy which is taxed a VAT rate of a mere 5%.
It is appalling that users of DIY solar should pay FOUR TIMES more VAT than on the energy which they save. This is an incredible DIS incentive for the most cost-effective way to do solar heating – as a DIY project. With domestic fuel being taxed at 5% VAT this means that DIY ers face pay 15% more tax to save fuel than to consume it.
Madness: it pays to pollute under this budget!
Relevant text of the 22 June 2010 budget report with Solartwin Comments.
The official 94 page 2010 budget report does not mention the words “solar” “microgeneration” or “renewable energy”. However it does mention a “low carbon economy” early on. Here are its exact words…
1.8 The Government’s macroeconomic strategy will help provide a stable economic foundation for private sector growth. Measures to promote enterprise will reduce regulation and tax rates and refocus support towards infrastructure, the low-carbon economy…
(Solartwin comment – good – reducing regulation might end the market veto that the incumbent old solar technologies exert over radical impriovements like Solartwin’s.)
(The detailed wording of the budget’s section on low-carbon economy follows below)
1.75 Climate change is one of the most serious threats that the world faces. The Prime Minister has pledged to make this the greenest government ever, including reducing the Government’s own emissions by 10 per cent between mid-May 2010 and mid-May 2011.
(Solartwin comment – good – strong commitment to (a) accepting climate change and (b) CO2 emissions cuts.)
1.76 The Government is committed to playing its part in moving to a low- carbon economy. The transition will change the shape of industry, growth and jobs. As part of this, the UK needs £200 billion of investment to 2020 to provide secure low-carbon energy. This will require reform of the energy market and action to attract additional private sector funding.
(Solartwin comment – good – (a) it is almost impossible to attract serious investment if you are subject to stop-start subsidy schemes (b) £200 bilion will go a long way.)
1.77 Carbon Price. Alongside wider market reforms, the Government will assess how the energy tax framework can provide the right incentives for investment. In the autumn, the Government will publish proposals to reform the climate change levy in order to provide more certainty and support to the carbon price. Subject to consultation, the Government intends to bring forward relevant legislation in Finance Bill 2011.
(Solartwin comment – please tax all fuel and don’t exempt domestic fuel – even if a lot of the extra revenue must be recycled into anti-fuel poverty measures.)
1.78 Green Investment Bank. The Government is also determined to address other barriers to investment in the low-carbon economy. Following the Spending Review, the Government will put forward detailed proposals on the creation of a Green Investment Bank to help the UK meet the low-carbon investment challenge. The Government is considering a wide range of options for the scope and structure of the Green Investment Bank. The options will be evaluated for effectiveness, fiscal affordability and transparency.
(Solartwin comment – could be good but risks ghettoising green industry and risks a “picking favoured winners” by a potentially centralised government state capitalism approach.)
1.79 Green Deal for households. The Government will establish a Green Deal for households through legislation in the Energy Security and Green Economy Bill, to help individuals invest in home energy efficiency improvements that can pay for themselves from the savings in energy bills. These improvements provide substantial and cost-effective carbon reductions but the initial cost can be significant, especially for low-income households. The Government will also continue to work on green financial products to provide individuals with opportunities to invest in the infrastructure necessary to support the green economy.
(Solartwin comment – Hope that green energy can be included here.)
1.80 These measures are expected to have positive environmental impacts by enabling investment in low-carbon infrastructure and technologies. The environmental impact of Budget measures will be assessed in more detail as proposals are developed.
(Solartwin comment – the devil is in the detail!)
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