Business rate hike 'sabotages' renewables

The change has been instigated by the Valuation Office - an executive agency of the Inland Revenue which answers to the Office of the Deputy Prime Minister.

From April, rates will be set in proportion to the receipts of each plant. For renewables this will include payments under the renewables obligation - which will effectively be taxed. Previously the rates were set at a fixed level per megawatt of capacity.

The Renewable Power Association, the British Wind Energy Association and the Scottish Renewables Forum said that the changes are "sabotaging fragile growth" in the industry.

Philip Woolfe from the RPA warned that biomass projects will be "stopped in their tracks" while wind power development will be cut by about a third.

Marcus Rand from the BWEA concurred: "We will be seeing a ridiculous situation where with one hand the Government is giving financial support to renewables while with the other it is taking some of that support away."

Based on preliminary assessments, the industry claims that rates for wind power will double on average, with some projects seeing a seven-fold increase. The maximum increase for biomass will be 145% but worst hit will be hydropower, which will see rises of up to 1,000%. Landfill gas sites will be assessed on a different basis which is still under discussion.

Appearing before a parliamentary inquiry in February, Environment Secretary Margaret Beckett said that the move appeared to be "something of an anomaly" that "does appear to penalise the people whom we do not want to penalise". Officials were in discussions to resolve the issue, she said.