The 2021 Budget will do little to specifically support the solar and storage industry, at least until the details of a number of policies have been clarified. The Government has earmarked small sums of funding to pilot certain nascent technologies. But there is a lack of major innovation in or financing for policies with the level of vision required to accelerate a green recovery and deliver the net zero transition.
• Capital Allowances – Perhaps the most consequential announcement for the solar sector yesterday was the introduction of temporary tax reliefs on qualifying capital investments from April 2021. We have requested clarity from the Government on the specific technologies which would quality for these. This measure will temporarily introduce increased reliefs for expenditure on plant and machinery. For qualifying expenditures incurred from 1 April 2021 up to and including 31 March 2023, companies can claim in the period of investment:
– a ‘super-deduction’ providing allowances of 130% on most new plant and machinery investments that ordinarily qualify for 18% main rate writing down allowances.
– a first-year allowance of 50% on most new plant and machinery investments that ordinarily qualify for 6% special rate writing down allowances.
• R&D Tax Relief – Alongside the Budget, the Government announced a consultation on R&D tax reliefs to incentivise innovation. The consultation runs to 2 June 2021. We will draft a response to this and solicit member input in due course.
• Freeports – The Budget sets out that freeports will be designated “areas where businesses will benefit from more generous tax reliefs, customs benefits and wider government support”. The details of these reliefs provided will be consulted on over the year, with the aim of implementation before the end of 2021.
Green Recovery/Building Back Better
• Solar gets little mention in the Build Back Better framework, beyond a reference to the continued cost decline of renewable technologies.
• The UK will establish a National Infrastructure Bank, to fund the ‘green industrial revolution’ across the UK, with an initial capitalisation of £12bn and an aim to support at least £40bn of infrastructure investment. One potentially significant aspect of its mandate will be its commitment to lending to local authorities, with reference made to the need for local energy solutions and coordinated retrofit programmes. We will aim to ensure that financing for solar projects is included as part of this and all the bank’s lending.
• The Government will issue its first sovereign green bond this summer, alongside a further green bond framework and additional bond issuance later in 2021.
• The Government intends to maintain the current freeze on Carbon Price Support at £18/tonne of CO2 in 2022-23.
• The Government has confirmed its intention to set out plans for expanding the UK Emissions Trading Scheme.
• Extensions to and further funding for existing apprenticeship schemes, and the announcement of a new scheme in England that will enable apprentices to work with several employers in one sector.
• £68 million in funding for a competition to deliver energy storage prototypes.
Green Homes Grant Scheme
• There was no mention of the cuts to scheme funding which have been widely reported. We are working to confirm the status of the scheme going forwards.