State aid approval for the exemption of supplies of CHP-generated electricity made by licensed utilities expires on 31 March 2013, and the Government will make an announcement on the decision to seek an extension in due course. The Chancellor keeps all taxes and associated exemptions under review.
In addition to climate change levy exemptions, the Government provide support for combined heat and power (CHP) via a number of mechanisms. For example:
The 2007 pre-Budget report stated that the Government will aim to ensure that arrangement for future phases of the EU ETS continue to recognise the carbon savings that CHP delivers;
Investment in good quality CHP is eligible for enhanced capital allowances (ECAs), which enable businesses to claim 100 per cent. first-year capital allowances on their spending on qualifying plant and machinery;
From 2010 smaller CHP plants will also receive carbon price signals from the new carbon reduction commitment;
CHP is exempt from business rates, and diesel used in CHP and certain other power stations is exempt from the hydrocarbon oils duty.
The Government will continue to assess the level of support provided to CHP in light of ongoing reviews by BERR, DEFRA and Ofgem.