Backup power distorting UK capacity market - report

Backup power installations funded by tax incentive schemes have distorted the UK’s capacity market and negatively affected taxpayers, a new report has claimed.

Energy policy consultancy Ecuity’s analysis, undertaken for independent power producer UK Power Reserve, found that the nation’s capacity market auctions for the past two years have been distorted by low bids from players using investment with tax relief, creating profit margin disparity, ‘an un-level playing field’ and ‘a mini-investment bubble’.  

‘The players in question are investing in power generation units with taxpayer-funded risk finance schemes like the Enterprise Investment Scheme (EIS), Venture Capital Trust (VCT) and Seed Enterprise Investment Scheme (SEIS) which the government set up to incentivize investment in high risk businesses,’ UK Power Reserve said. ‘This kind of power generation is not high risk. Investors can earn up to six times their initial investment in just four years with tax relief.’

Ecuity estimated that over 700 MW in backup power capacity has benefited from tax breaks in addition to capacity market payments.  

The Department of Business, Energy and Industrial Strategy (BEIS) has opened a consultation on the issue, and has proposed offsetting capacity payments against tax relief.

Image: Adrian Pingstone, Wikipedia

 

 

Did You Like this Article? Get All the Energy Industry News Delivered to Your Inbox

Subscribe to an email newsletter today at no cost and receive the latest news and information.

 Subscribe Now

Whitepapers

The Time is Right for Optimum Reliability: Capital-Intensive Industries and Asset Performance Management

Imagine a plant that is no longer at risk of a random shutdown. Imagine not worrying about losing...

Going Digital: The New Normal in Oil & Gas

In this whitepaper you will learn how Keystone Engineering, ONGC, and Saipem are using software t...

Maximizing Operational Excellence

In a recent survey conducted by PennEnergy Research, 70% of surveyed energy industry professional...

Leveraging the Power of Information in the Energy Industry

Information Governance is about more than compliance. It’s about using your information to drive ...