The cost of developing solar projects has increased by up to 50% as a result of the Electricity Generator Levy and inflation, Energy UK has said.

Due to the newly introduced Electricity Generator Levy, current inflation levels and supply chain difficulties, costs associated with the creation of low carbon generation projects have increased by between 20% to 30%, with some quoting 50% for specific projects, Energy UK said in its Storms Approaching: How to prevent an investment hiatus in UK low carbon generation report.

Energy UK believes the investment climate for UK low carbon generation has deteriorated significantly in recent months. One of the biggest factors contributing to this is the government’s controversial Electricity Generator Levy, revealed in last year’s Autumn Statement.

The levy taxes electricity generators at a rate of 45%, which covers aggregate revenue generators make above £75/MWh. Generators whose in-scope generation output exceeds 100GWh annually are subject to the levy, which applies only when extraordinary revenues exceed £10 million. This came into force from 1 January 2023 and will be legislated for in the Spring Finance Bill 2023.

Other issues plaguing the UK low carbon generation market include inflation, interest rates, supply chain difficulties, increased competition, systemic regulatory uncertainty and lengthy delays to planning and grid connections, which currently are holding back projects from being developed quickly.

Read more: SolarPowerPortal

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