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Tax rebates could drive energy market transformation

THE GOVERNMENT should consider cuts to stamp duty to encourage homeowners and businesses to produce their own electricity, according to Warwick Business School.

The UK is seeking to switch to more carbon-neutral and sustainable energy sources and decrease dependency on fossil fuels, which are often imported.

Consumers are being hit by rising energy prices as the transition begins, but with much more investment in new nuclear plants and renewable energy needed, Dr Frederik Dahlmann of Warwick Business School believes businesses and homeowners should be encouraged to produce their own electricity and gas.

“To create a genuinely open electricity market to attract new energy entrepreneurs and ‘prosumers’ – companies and individuals that are both electricity generators and consumers – perhaps a different set of financial incentives are needed, ones that would make investments in energy infrastructure more immediately attractive,” said Dahlmann, who previously worked as an energy analyst in London.

“How about tax rebates for all companies and stamp duty offsets for homeowners that invest in decentralised energy generation such as rooftop solar and wind, or in energy efficiency measures?

“The aim should be to make the energy market more democratic by increasing the ways in which people choose and participate in, finance, and benefit from the decentralised solutions to the energy market’s problems, rather than leaving this to government and the Big Six.”

Existing examples include of homeowners producing electricity via solar panels on their roofs, Adnams brewery using renewable waste products to generate gas, and Hamburg in Germany buying back its distribution network.

The government already has tax incentives planned for companies conducting shale gas explorations. Under that scheme, tax imposed on income generated on shale gas would be cut from 62% to 30%, making the UK’s regime the most generous in the world for extraction of the gas.

“The question is whether forward-looking financing mechanisms like these are sufficient to attract the new energy entrepreneurs and ‘prosumers’ to the market. Behavioural science tells us that, especially with incentives whose pay-off lies in the distant future, people are often unwilling to make the investment now for a payback later,” Dahlmann added.

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