United Kingdom

United Kingdom

Rises in local property taxes hits UK wind profits

Google Translate

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.

Have you registered with us yet?

Register now to enjoy more articles
and free email bulletins.

Sign up now
Already registered?
Sign in