Memorandum submitted by the British Retail
Consortium
THE BRITISH
RETAIL CONSORTIUM
1. The British Retail Consortium (BRC) is
the lead trade association of UK retailing and exists to defend
and enhance where possible, the economic, political and social
climate in which its members operate. BRC members sell a wide
selection of products through centre of town, out of town, rural
and virtual stores. Reflecting the diversity of modern retailing,
BRC members include the large multiples and department stores,
charity shops and small and medium sized independent retailers.
In 2004 retail sales totalled £246 billion representing 35%
of total consumer spending, channelled through 184,700 VAT registered
retail businesses. The retail industry employs nearly three million
people and accounts for one in nine (11%) of the total UK workforce.
INTRODUCTION
2. Climate Change is now recognised as a
key driver of energy policy internationally, and the UK government
has signalled that renewable energy technologies should be central
in the future development of the UK electricity supply industry.
The Government has set a target to generate 10% of the UK's electricity
supply from renewable energy sources by 2010. At present, less
than 3% of the UK's electricity supply comes from renewable sources.
In order to meet the 10% target the UK will need to install approximately
10,000 MWe of renewable capacity by 2010, an annual build rate
of over 1,250 MWe.
3. To promote business take-up of renewable
technology, the Government has taken a number of positive steps,
including:
— Climate change levy exemption for
electricity generated from renewable energy sources;
— Reduction of VAT to 5% on renewable
energy systems that are purchased from and installed by the same
company;
— Business Rates exemption for "Good
Quality" Combined Heat and Power (CHP) plant and machinery.
4. It is clearly anomalous for the Government
to exempt CHP (which still emits carbon) from valuation but to
rate entirely carbon free forms of renewable plant such as wind
turbines and solar photovoltaics (PV). This paper argues that
this anomaly in the rating system is leading the Government to
perversely tax business investment in micro-renewable systems.
VALUATION OF
RENEWABLE ENERGY
PLANT AND
MACHINERY
5. For valuation purposed the Valuation
Office Agency (VOA) does not make a distinction between small-scale
renewable energy plant and traditional fossil fuel burning power
generators. Accordingly an incongruous situation has emerged where
retailers who look to reduce their carbon emissions by investing
in renewables are penalised with increased liability. It is clearly
anomalous for the Government to exempt CHP (which still emits
carbon) from valuation but to continue to rate entirely carbon
free forms of renewable plant such as wind turbines and solar
photovoltaics (PV).
6. The rating of small-scale renewable plant
is perverse in so far as retailers who look to reduce their carbon
emissions by investing renewables are penalised with increased
rating liability and retailers have voiced the opinion that this
practice is a deterrent from taking up these important technologies.
To remove this anomaly and bring rating practice in line with
the Government's renewable energy plant and machinery should in
our view be exempt from valuation.
7. Clearly VOA policy has not kept up with
the pace of wider Government thinking on renewable energy and
climate change. When CHP was exempted from valuation in 2001,
retail interest in renewable technology was limited. However in
recent years there has been a real growth in the renewable energy
sector and now on-site renewable systems are an option for increasing
number of retailers. It is clearly anomalous for the Government
to exempt CHP (which still emits carbon) from valuation but to
continue to rate entirely carbon free forms of renewable plant
such as wind turbines and solar photovoltaics (PV).
ENABLERS AND
BARRIERS TO
DEVELOPING RENEWABLE
TECHNOLOGIES IN
THE RETAIL
SECTOR
8. Ernst & Young's global renewable
energy market report ranks the UK as one of the two most attractive
countries in the world for investment in renewable technologies.
However, in the most recent edition of the report, the UK's position
is downgraded for the first time because of the Government's business
rates regime.
9. The retail sector has the potential to
go some way in helping the Government meet its ambitious target
of generating 10% of the UK's electricity from renewable energy
by 2010. However at the present time it is still more cost effective
for retailers to source their energy needs from the national grid.
For the retail sector, and indeed other business sectors operating
these systems, micro-renewables are not a cost saving device.
The rating of micro-renewables further re-enforces this situation.
Retail investment in renewable energy systems must be encouraged
by consistent policy support from Government, and a flexible style
of policy capable of responding to technological developments.
28 September 2005
| 
