Bloomberg News

U.K. May Shutter Most Efficient Energy Plants on Tax, Lobby Says

November 29, 2011

Nov. 28 (Bloomberg) -- U.K. industrial sites may close on- site combined heat and power plants, one of the cheapest forms of curbing greenhouse-gas emissions, and halt plans to build more under a revamp of energy taxations, a lobby said.

Government plans to change taxation on industry known as the climate change levy, or CCL, that includes a carbon-dioxide tax on burning fossil fuels may erase a subsidy of as much as 140 million pounds ($218 million) a year for so-called CHP plants, according to the Combined Heat and Power Association, a London-based lobby group supporting the technology.

“It risks shutting CHP plants and has made CHP a much less attractive option,” Tim Rotheray, London-based policy manager at the CHPA, said in an interview in London. “Some industrials are considering halting CHP plants altogether and simply replacing them with boilers that will lead to higher CO2 emissions.”

Tata Group, Ineos Group Holdings and British Sugar, are among Britain’s largest energy users that have power generating units on site and use the waste or recovered heat. This helps reduce exposure to wholesale energy prices and may shield them from future price hikes. The planned changes to taxation may make the plants uneconomical to operate, Rotheray said.

“They have fewer options to manage exposure to wholesale power prices,” he said. The tax system must acknowledge emissions savings from using the waste heat and not deter future investments, he said.

CHP Capacity

Britain has about 6 gigawatts of combined heat and power stations that avoid about 13 million metric tons of carbon dioxide, according to the CHPA. The country lags behind Germany and the Netherlands in its use of the technology, according to the lobby. CHP plants could have capacity of as much as 11.3 gigawatts by 2020, according to government models.

“I’ve listened to industry’s concerns over the pronounced effect that the removal of CCL will have on large-scale CHP, both on new investment but also the viability of existing plant,” U.K. Energy Minister Greg Barker said last week at a conference in London. “I have instructed officials to consider other options for supporting CHP, with a mandate to be really ambitious.”

Siemens AG, Balfour Beatty Plc and General Electric Co. are among companies that supply equipment to build CHP plants in the U.K. EON AG will send waste heat from its 1,200 megawatt natural gas-fed power station at the Isle of Grain, southeast England, for use at a nearby liquified natural gas terminal. The technology is one of the cheapest ways of cutting carbon and saving energy as Britain strives to slash emissions by 80 percent below 1990 levels by 2050.

The CHPA represents companies including Tata Chemicals Europe Ltd., British Sugar Plc, Scottish Power Plc and Siemens Energy.

--Editors: Rob Verdonck, Alessandro Vitelli

To contact the reporter on this story: Catherine Airlie in London at cairlie@bloomberg.net

To contact the editor responsible for this story: Stephen Voss at sev@bloomberg.net


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