REA response to Government's Energy Security Investment Mechanism

The REA (Association for Renewable Energy and Clean Technology) responded to the Government’s new oil and gas tax changes. The Government will introduce a new Energy Security Investment Mechanism which will reduce the marginal windfall tax rate on oil and gas producers, called the Energy Profits Levy, when energy prices return to consistent normal levels. The intention is to ensure that investments in domestic energy supply are safeguarded.

However, the REA says that being serious about protecting energy security and British jobs requires applying these benefits to the cheapest forms of domestic electricity generation, which also happen to be critical to delivering a decarbonised electricity system. As such the Energy Security Investment Mechanism must also be extended to reduce the tax rate being placed on the low carbon generators under the equivalent Electricity Generator Levy.

The renewables and clean tech sector is key to tackling the volatile costs of fossil fuels at the heart of rising energy bills, and its treatment must be fair and equitable in relation to the oil and gas sector.

Mark Sommerfeld, Head of Power and Flexibility at the REA (Association for Renewable Energy and Clean Technology) said: “Once again, the Government are focusing tax cuts on fossil fuel producers, while the equivalent windfall tax on renewables, called the Electricity Generator Levy (EGL), remains unchanged. Today’s announcement for the Energy Security Investment Mechanism will reduce the tax liability on oil and gas producers when energy prices return to consistently normal levels, however, will not apply to renewable generators, despite a harsher tax on low carbon generation. 

Furthermore, the Government has repeatedly ignored calls to introduce a dedicated Investment Allowance for renewables, which would promote low carbon investment, despite the equivalent allowance again already being in place for oil and gas.

“Government is presenting today’s announcement as necessary for delivering energy security, yet it is not applying these benefits to the cheapest forms of domestic electricity generation, which also happen to be critical to delivering a decarbonised electricity system.

“If Government is at all serious about energy security, The Energy Security Investment Mechanism must be extended to renewables and the EGL be urgently reformed.”