Reasons for U.K. to freeze carbon tax

"A senior renewable industry source said compensation would be “appropriate”"

Taxation polices that don't attract investment but increase consumer costs might be inappropriate.

Wind farm earnings hit by plans to freeze carbon tax - Telegraph:

Wind farm owners across Britain will earn tens of millions of pounds less than expected because of plans by the Government to freeze the carbon tax. Solar farm, biomass and nuclear plant owners will also see future earnings cut by the change, widely expected to be announced in the Budget later this month.

The carbon tax was announced in the 2011 Budget and came into effect last year, with the aim of encouraging new green power plants. It sets a “floor” for the price of burning carbon each year.

The tax has the effect of pushing up the wholesale market price for electricity — increasing profits for renewable and nuclear generators who do not have to pay it.

Critics say it has been insufficient to attract investment, but has handed windfall profits to green plants built before it was introduced. Most damagingly, it makes UK manufacturers increasingly uncompetitive and pushes up consumer energy bills – adding £5 in 2013, rising to £50 by 2020.


Amid political pressure to curb rising energy costs, the Chancellor is widely expected to freeze the tax at 2015-16 levels of about £18 per tonne of carbon – up from about £5 now – and potentially rule out further increases for the rest of the decade.

The move would hit investors who bought or built new green plants since 2011. “Anybody who has either developed or bought a wind farm over the past three years, since the carbon floor was introduced, would have been working on basis power prices would rise alongside the carbon tax, John Musk, analyst at RBC Capital Markets, said.

The entire article can be read at the Telegraph.


This appears to have the U.K. joining Australia in the carbon tax scale-back club.


Introducing a low level carbon tax and then escalating it may not be politically feasible.

The Global Warming Policy Foundation's website has posted an excerpt from a Sunday Times article providing a different view of the issue - the loss in value of traditional plant and subsequent avoidance of the U.K. for investment.
The U.K.'s largest challenge, in which they join many other countries attempting to boost VES (variable energy systems - oft called renewables ... sometimes vRES), is in ensuring capacity to keep the electricity on.

DEEPENING ENERGY CRISIS: BRITAIN HAS BECOME ‘UNINVESTABLE’, ANALYST WARNS

The German owner of Npower is set to write off hundreds of millions of pounds on the value of its British power plants in the latest sign of a deepening crisis among the big six energy suppliers.
...Peter Atherton, analyst at Liberum Capital, said Britain had become uninvestable as political pressure over soaring household bills has intensified. “I can think of a dozen very good reasons not to invest in the UK, and not one good one to invest here this side of the election,” Atherton said.

and ...

Wind farm plans in tatters after subsidy rethink |The Telegraph

Developers are abandoning plans for new wind farms in Britain because they are “no longer financially viable”.

The decision to scrap the wind farms is the first evidence that the spread of turbines across the country is being halted. It follows a radical overhaul by the Government of the consumer subsidy, worth more than £1 billion a year to wind farm owners.

Under the subsidy, wind farms are guaranteed to receive double the wholesale price for the electricity they produce. Under the new scheme, to be introduced later this year, companies will have to sell their electricity to the national grid under a competitive bidding system.

...
A spokeswoman for the Department of Energy and Climate Change said: “Onshore wind is the cheapest large-scale renewable technology and has a key role to play in our energy mix. It is a thriving and mature industry and it is right that Government support should reduce as the cost of generating comes down."

hat tip to Quixote's Last Stand on finding the Telegraph article.