Memorandum by the British Photovoltaic
Association (CC70)
This Memorandum is submitted in response to
the request for additional evidence with particular reference
to the Climate Change Levy. It addresses the further details on
the Climate Change Levy as issued by HM Treasury this month.
In May 1999 the British Photovoltaic Association
(PV-UK) issued a response to the proposals for the Climate Change
Levy contained in the consultation paper issued by HM Customs
and Excise. The response was broadly in favour of the proposals
but raised a number of issues critical to the future of the renewable
energy industry in the UK and to the photovoltaic industry in
particular. The response is appended for information.
The Association is pleased to note that the
generation of electricity from renewable energy will be exempt
from the Levy.
The foreseen development of small photovoltaic
generators includes widespread introduction of them into domestic
premises with surplus solar energy being fed back into the distribution
network. Therefore the manner in which exemption from the levy
is to be achieved will need to be a simple mechanism which will
not entail registration or other administrative effort for small
embedded generators.
The NFFO has had its successes in stimulating
renewable energy generation in the UK but it is not suited to
very small scale embedded generators due to the construction of
the NFFO scheme and its associated procedures. It is not a valid
stimulant for embedded generators which are designed primarily
to provide power for consumption within the same premises, such
as photovoltaic systems. The Climate Change Levy provides an opportunity
to develop a more appropriate mechanism for the encouragement
of photovoltaics.
The Association welcomes the proposed increase
in the portion of the levy devoted to support of energy efficiency
measures. To be consistent with the fundamental purpose of the
Climate Change Levy, the proposal to use the funds to allow for
the introduction of 100 per cent capital allowances for energy
saving instruments should clearly be extended to cover the installation
of embedded renewable energy systems which will contribute to
minimisation of electricity supplied from conventional sources
and therefore to CO2 reduction.
It is noted that the 100 per cent capital allowance
will bring no encouragement to installation of renewable energy
systems in the potentially huge sector of domestic installations.
An alternative method of encouragement is needed. The electricity
markets are currently distorted in favour of fuel consumption
over the installation of fuel-saving but capital intensive renewable
energy equipment by the reduced rate of VAT which is applicable
to electricity and gas supplies. The use of levy funds to compensate
for the reduction of VAT on renewable energy equipment would correct
present distortion in the markets, stimulate the development of
renewable energy technologies and send the right signals to industry
and the general public regarding the objectives of the Climate
Change Programme.
Given the long history of manufacture of PV
equipment in this country and the benefit this brings to the nation
through the high percentage of output that is exported, the Association
is anxious that domestic manufacturing is nurtured. In this regard,
the Association would welcome the extension of the 100 per cent
capital allowances to the domestic PV manufacturing industry.
Jenniy Gregory,
Secretary General
17 November 1999
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