Renewable power loses Climate Change Levy exemption

From 1 August 2015, renewable power will cease to qualify for exemption from the Climate Change Levy (CCL).

This follows an announcement in the July Budget, when Chancellor George Osborne said he was going to remove what he called “the out-dated Climate-Change-Levy exemption for renewable electricity that has seen taxpayer money benefiting electricity generation abroad”.

He was referring to CCL relief obtained on renewable energy imported from Continental Europe via interconnectors. Due to EU State Aid regulations, relief cannot only be offered on UK-generated renewable power – so either all has to qualify, or none.

LECs now defunct

This means that customers receiving electricity matched with renewable supplies will be required to pay CCL from 1 August. At the same time, the ‘Renewable Charge’ that covered the cost of Levy Exempt Certificates (LECs) issued by renewable generators will no longer appear on bills, as these are now defunct.

“Although CCL will apply from August, it won’t actually become law until the required legislative change has been made to the Finance Act, which we expect to happen towards the end of October,” explains Wayne Mitchell, Director of Markets & Innovation for npower Business Solutions. “Only then can we enact a contract provision allowing customers to opt out of receiving renewable power if they so choose.”

Evidencing renewable supply

“We are also awaiting more information about how customers can evidence renewable supply. With LECs no longer applicable, we anticipate that Renewable Energy Guarantees of Origin certificates (REGOs) will take their place, but it’s currently unclear whether generators will start to charge for these to replace lost LEC revenue. As soon as these issues are resolved, we will communicate with all our customers currently on renewable supply contracts.”

Customers with a Climate Change Agreement in place for their industry or sector will still be entitled to a reduction in CCL. Electricity classified as domestic use – for example running a care home or student accommodation – and for non-business activities by charities, plus certain types of transport may also be exempt. Visit the HMRC site for more details.