Autumn Statement 2023: new renewable projects exempt from electricity generator levy

The investment exemption applies to new projects, defined as those where a “substantive decision to proceed” was taken on or after the date of the 2023 Autumn Statement, 22 November, according to a technical note published by the UK Treasury.

The EGL is a tax on windfall profits made from the wholesale of electricity generated from non-fossil fuels – renewables and nuclear – which was introduced on 1 January. It applies to electricity generated from a “relevant generating station”.

The exemption targets the development of wholly new generating stations, projects to expand existing generating stations and re-powering of existing generating stations. According to the technical note, the government does not intend to prescribe detailed rules to define “substantive decision to proceed” in legislation, but that it ought to be equivalent to the ‘final investment decision’ stage commonly used by large projects. The exemption will not apply where expenditure has been incurred on maintenance or extending the life of existing generating stations.

Energy expert Ronan Lambe of Pinsent Masons said: “The technical note includes indications of what the government expects to see in order to fall within the exemption, such as expansion beyond the former boundaries of a site, or the installation or additional generating equipment. However, it is not yet clear how much will be prescribed in the draft legislation expected shortly”.

“Generators will want to have certainty over the extent to which the exemption will apply to their projects and it is clear, even in the short technical note, that there will be blurred lines between a new project and the maintenance or extension of existing projects that may make that difficult to achieve,” he said.

The technical note also lists objective factors that could be considered relevant in deciding whether a “substantive decision to proceed” was taken before 22 November.

Tax expert Jake Landman of Pinsent Masons said: “These include matters such as whether investors have released project funding, whether there is board level commitment to undertake the project, and public statements about the decision to go ahead”.

"Those who are currently planning a new station or new capacity will want to make sure they benefit from this exemption and part of it will come down to where they are in their decision making. While a list of relevant factors is helpful to some degree, it is not difficult to envisage a situation where some of those factors are met before the 22 November and some afterwards, therefore generators will need to consider the proposals very carefully,” he said.

Draft legislation is expected to be published as soon as possible for inclusion in the next Finance Bill. The Treasury is encouraging those affected by the EGL to provide feedback on the proposals to its EGL policy team.