The March 2016 Budget contains a number of tax and spending measures that will affect the Power and Utilities sector.
- The Carbon Price Floor (CPF) remains in place. CPS rates are increased in line with inflation for 2020-21 from £18 t/CO2. Review announced of future trajectory for the CPS.
- Renewables: £290m for second CfD auction later this year –enough for up to two large offshore wind projects to secure contracts, with a total budget for new renewables deployment in this Parliament of £730m.
- OBR revises down forecast for spend on low carbon generation under Levy Control Framework (LCF) to £8.7bn in 2020/21 (2011-12 prices), down from previous forecast of £9.1bn, following cuts to subsidies last year.
- Simplification of business energy efficiency tax landscape with abolition of Carbon Reduction Commitment. Offsetting increases in Climate Change Levy to recoup lost revenue.
- Small Modular Nuclear Reactors (SMRs): £30m for UK nuclear capability and Road Map later in the year.
- Energy Delivery Landscape –DECC commits to simplifying energy delivery landscape. Confirmation that E-Serve will move out of Ofgem, alongside a commitment to ‘greater independence’ for System Operator.
- Government accepts National Infrastructure Commission recommendations on energy.
- Commitment of at least £50m over the next five year for innovation in energy storage, demand-side response and other smart technologies.
- Corporation tax rates reduced to 17% from 2020 but restriction in utilisation of tax losses may adversely impact project economics.
- Tax relief for interest to be restricted to 30% of EBITDA with detailed rules yet to be fully defined.