Rises in local property taxes for wind farms have made the UK less attractive to investors, reveal accountants Ernst & Young in their quarterly analysis of global renewable energy markets. From April 1, the method for calculating UK local property taxes has changed. Instead of a uniform rate based on megawatts of capacity, the new system assesses each site individually and sets taxes as a percentage of the notional profit of the plant, including income from Renewable Obligation Certificates. Ernst & Young says average taxes will go up by around 40% in England, but higher wind speed projects and Scottish generators will suffer the highest rises. Although Ernst & Young's assessment suggests the impact of the tax rise is dramatic, some projects will barely be affected, while on average the tax rise will increase the price of wind power by £1.1/MWh, reducing the internal rate of return by about 1%. In a worst case, however, the increase is £2.5-3.0/MWh, reducing the return for investors by about 4%. As Ernst & Young points out, coupled with increases in transmission charges under the opening up of the new Britain-wide electricity market, the tax rise will hit Scottish projects the hardest. Together with Spain the UK currently occupies the top slot in Ernst & Young's index of attractive markets for wind investment, but it could slide down the rankings if onshore build rates and offshore momentum do not pick up, warns the company's Jonathan Johns.
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