We look at examples of government support in the UK. There are various tax allowances, but some of them may not be particularly useful for a large scale renewable energy project. For example, there is a 100% annual investment allowance. You can claim the entire capital cost of assets for tax purposes in the first year in which you buy them, but that only applies up to 1 million per annum. For a large scale wind farm or solar farm, that's helpful, but it's pretty small scale. 100% capital allowances for tax depreciation are available for companies investing in energy saving equipment, but those same rules don't apply to energy generating equipment. There is a smart export guarantee regime in the UK, which is effectively an obligation on power resellers to buy from small scale producers. If you are modeling a small scale renewable energy project, this guarantee regime would be useful because it's creating a market for small scale generation. In the UK we used to have a system called Rocks Renewable Obligation Certificates, under which those supplying energy from fossil fuel generation were required to buy credits from those producing energy from renewable resources. So if you were a producer of renewable energy, your plant was certified as to how much it could produce each year of renewable energy. You could then create certificates certifying how much you had produced, and you could sell those certificates in a market. And fossil fuel producers were obliged to buy those certificates to offset the pollution that they had created by burning fossil fuels. There is an active market in those, and it is a source of revenue for generators using renewable energy. That scheme closed to new projects in 2017, but any scheme in existence prior to that date continues to benefit from it, providing them with a stream of revenue for the next 20 years until the end of the scheme. The UK government's current main mode of support for renewable energy is a contract for different scheme under which a government-owned company sets a long-term price with renewable energy generators using an auction process. The difference between the market price on any one day and that contracted auction price is either compensated for if the market price is too low or taken by the government owned company if the price is higher than the unit price that was set at the auction. Effectively, this takes away the risk of price fluctuation for a renewable scheme. If prices are high, they don't get to take advantage of that, but if prices are low, they are compensated up to the level of the auction bid price that they put in. Within the contracts for difference scheme, there are some small direct subsidies available, but they're very small and most renewable schemes would not be able to take advantage of them. What is maybe more useful is that the crown estate has recently announced that if a renewable energy company wishes to lease space on the seabed, for example, to put up offshore wind turbines, then they can have a rent-free lease for the first five years. So that clearly reduces the operating cost of that wind farm because at least the first five years are rent-free. After that, we'd need to account for and include rent in our model.
