To allay uncertainties associated with the renewable energy (RE) premium rates of the Carbon Tax Act, the National Treasury has published a new draft RE Premium Notice, proposing the removal of the limitation of the tax period for which the RE premium rates would be applicable.
The Carbon Tax Act came into effect in June 2019 to help ease the electricity sector transition and to further promote investment in renewable energy, thereby provisioning for electricity generators to offset additional purchases of renewable electricity against their carbon tax liability for the first phase of the carbon tax until December 31, 2022.
Treasury explains that, at the time, a notice setting out the RE premium rates applicable for the different RE technologies for the 2019 tax period was gazetted in June 2020 (Government Gazette number 43453).
However, Treasury notes that there was a lack of clarity on the RE premium rates to be used to determine the quantum of the offset for the 2020 tax period since the current notice and RE premiums were only applicable for the 2019 tax period.
To provide policy certainty to taxpayers going forward, changes to the initial notice are necessary to clarify the RE premium rates contained in the current notice and make them applicable for the 2020 tax period.
As such, Treasury, in the draft notice under Section (6)(2) of the Carbon Tax Act, which is effective as of January 1, 2020, declares that, for the purposes of symbol B in the formula contained in Section 6(2) of that Act, the renewable energy premium in respect of any tax period will be R2.09/kWh for biomass and R4.11/kWh for concentrated solar power.
Landfill gas is proposed to be R1.35/kWh, while onshore wind power is earmarked at R1.23/kWh.
Solar photovoltaic power is listed as R2.27/kWh, R1.61/kWh for hydropower not exceeding 15 MW of installed capacity, and 84c/kWh for hydropower of greater than 15 MW installed capacity.
According to Treasury, amending the RE rates will address any uncertainties for the period between the lapse of the old notice and gazetting of the new notice, as well as avoid delays in the submission of carbon tax returns to the South African Revenue Services by taxpayers for the 2020 tax period.
Any possible future adjustments of the RE premium will be made by way of an announcement in the Budget and publication of a draft notice for public consultation.
With the draft RE rates, Treasury invites written comments from interested stakeholders on the draft RE Premium Notice by the close of business on September 3. Following receipt and consideration of public comments, changes will be made to the notice and a final notice will be published in the Government Gazette.