Energy boss warns against ‘unfair’ windfall levy
One of Scotland’s energy bosses said its investment plans will be put under review if the government goes ahead with a discriminatory windfall tax on renewable power generation.
Keith Anderson, chief executive of ScottishPower, said any windfall levy must be applied to the entire power generation sector.
He also insists the government should tax only excess profit and should provide more generous tax breaks to support investment in renewables.
His comments come ahead of the Autumn Statement when Chancellor Jeremy Hunt is expected to increase the energy profits levy on North Sea oil and gas producers imposed in May from 25% to 35%. Mr Hunt is also expected to extend the levy to the power generation sector.
Mr Anderson said ScottishPower, which is part of Iberdrola, the Spanish group, would be “pragmatic” about a windfall tax but he warned that ScottishPower could slow or reduce its investment in Britain if it was not considered fair.
“It will make us reconsider. What do we invest in the UK? How quickly do we invest it in the UK? And are there other markets that are more attractive than the UK?” he said.
The company will be investing £6.7 billion in Britain between 2023 and 2025 but has yet to state its investment plans for the following years.
“If there is going to be a windfall tax or some kind of taxation change, then it should cover everyone, not just wind farms and not just renewables, but the whole of the energy sector,” said Mr Anderson.
He said that owners of gas-fired power stations, nuclear reactors and pumped hydroelectric plants were more exposed to short-term spot prices “and therefore are making more money than anybody else”.
ScottishPower’s earnings before interest, tax and other charges from its renewables business rose by 22% to £451 million in the first nine months of the year because of higher output in windier weather.
But Mr Anderson said the company was “absolutely not” making windfall profits because it had pre-sold its power output between 18 months and two years ago at prices well below today’s high wholesale prices.
“I don’t think there will be any justification at all to put any kind of additional tax on a renewables business like ours right now,” he said.
His comments coincide with a survey from Aberdeen & Grampian Chamber of Commerce stating that the industry has been left paying one of the highest levels of corporation tax of any sector anywhere in the world.
With tax breaks ring-fenced for oil and gas investment rather than low carbon technologies, there is concern that the opportunity to accelerate the energy transition is being missed.
The Energy Transition Survey – which is now in its 19th year – makes four recommendations to government. It seeks a stable fiscal regime for the North Sea, with no expansion of the windfall tax, alongside an extension of the investment allowance to include low carbon technologies.
It also calls for measures to accelerate business transition to net zero, and for the UK Government to progress the Scottish carbon capture cluster.
Ryan Crighton, policy director at Aberdeen & Grampian Chamber of Commerce, said: “Half of the companies surveyed for Energy Transition 36 said that the current political environment was a barrier to their diversification into new low carbon energies.
“And it is easy to see why after a summer of Machiavellian manoeuvres at Westminster, and further anti-oil and gas rhetoric from the Scottish Government.”