GAS producers are set to receive a £500m tax break, while there will be a 10 per cent cut in the subsidies provided for onshore wind turbines, the government announced yesterday.
It is understood that the Treasury was keen to cut wind turbine subsidies by 25 per cent but Lib Dem energy secretary Ed Davey successfully argued that this would severely affect private sector investment in renewable energy.
Following a strong lobbying campaign the government also affirmed its commitment to gas production, saying: “We do not expect the role of gas to be restricted to providing back up to renewables”.
As a result it will exempt the first £500m of income from new shallow gas fields in UK waters from the supplementary 32 per cent tax rate.
“The support we’re setting out today will unlock investment decisions, help ensure that rapid growth in renewable energy continues and shows the key role of renewables for our energy security,” Davey said.
Shares in Drax Group, which has been planning to transfer its flagship power station from coal-fuelled to biomass, fell 16 per cent as traders felt the proposed green energy subsidies were not as generous as expected.