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United Kingdom

United Kingdom

Budget threatens wind profits

Changes introduced in the government's budget in November could affect the economic viability of new UK wind farms. However, developers are still unsure whether or not new legislation on capital allowances for machinery will affect wind turbines. In his budget, Chancellor of the Exchequer Kenneth Clarke announced that capital allowances on assets with a life of more than 25 years will be reduced to 6% instead of the 25% allowance they currently enjoy. According to Jonathan Johns of Accountants Ernst & Young, this could have an impact on new wind farm developments where the contract was not placed before budget day. "The irony is that the manufacturer producing a better turbine with a longer life gets a smaller writing down allowance. With some turbine manufacturers claiming a working life of over 30 years, developers need to consider an urgent review of current NFFO-3 projects and their bidding criteria for NFFO-4." The position for wind farm developers -- and other large renewable projects -- will become clearer when detailed legislation is published. Johns adds that until then Ernst & Young has set up an advice line to answer developers' questions.

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