Powerful Thinking’s chair, Tim Benson examines the potential impacts of the incoming government imposed reforms to red diesel and other rebated fuels entitlement next April – essential reading for event organisers and event power providers alike.
Benson clarifies where biofuels sit in the reforms and checks potential loopholes in policy with Priti Khatri, policy adviser for excise & environmental taxes policy design. He speaks to event organisers and event industry organisations, as well as power contractors, about the potential impacts on their operations; questions the timing of such a hefty increase in fuel expenses for an industry reeling from the covid pandemic – and shares his thoughts on the long-term positives in terms of cutting CO2 emissions through an accelerated move to mains power, high storage capacity battery systems, and improved energy efficiency.
As of April 2022, the event industry is set to see their generator and plant fuel bills skyrocket by almost 48p per litre. This is a direct result of policy changes introduced by the UK Government in its Finance Bill of 2021 and subsequent secondary legislation. Red diesel, which is taxed favorably in comparison to the white diesel used in road vehicles, can currently be used in generators and site plant machinery. However, as of 1 April 2022, this entitlement is being removed and event organisers will see their fuel bills soar by almost 50%.
The Government cites their 2050 net zero emissions objective as the primary driver here: according to their figures, red diesel usage accounts for 15% of the UK’s total diesel consumption, producing 14 million tonnes of CO2 annually.
Ambiguity in some of the policy wording led me to contact the Treasury directly. For example, the policy document states that exemptions apply for “heating and electricity generation in non-commercial premises” and “off-grid power generation” – could these be loopholes that event organisers could exploit? Priti Khatri, policy adviser for excise & environmental taxes policy design, responded to my enquiry stating that, as most events are commercial in nature, they are unlikely to qualify for any ongoing entitlement to use rebated fuels.
There were also questions as to whether HVO biofuel would be exempt, as the policy document specifically references biodiesel in their list of fuel categories to which this policy pertains. Priti’s response was emphatic: “HVO is renewable diesel and is 100% synthetic hydrocarbon, and therefore falls within the definition of gas oil [red diesel]”.
Furthermore, this new legislation prohibits the bulk purchasing of red diesel prior to 1 April for use thereafter. Customs & Excise is very clear that all traces of red diesel will need to be removed from fuel bowsers by this date and failure to do so could result in hefty fines.
From an environmental perspective, surely this seems like a positive step? By taxing red diesel users at the standard rate, the Government hopes that these financial penalties will incentivise generator users to reduce their overall consumption, take greater steps to be more energy efficienct & encourage investment in cleaner power generation technologies.
In essence, this a long overdue carbon tax welcomed by many, & it should go a long way towards reducing the carbon footprint of our events.
Of course, theory and practice are two very different things. What on the surface might seem a positive & laudable environmental change has to be balanced against the needs & current state of the events industry, one that is still licking its wounds following 18 months of inactivity and virtually zero revenue. With this in mind, I approached event organisers, power contractors and industry bodies to ascertain their thoughts, a summary of which is set out below:
Event Organisers & Industry Bodies:
- Worryingly, many were unaware that fuel prices were set to double; some said that industry press coverage around these changes has been minimal & they felt left in the dark
- Organisers of both small & large scale events fear the impact the most; those putting on small shows with minimal budgets are concerned that said increases could sign the death knoll for their shows, whilst those organizing large scale events feel that raising ticket prices to cover these additional costs is untenable, particularly as they are already asking attendees to be mindful of their personal travel & waste carbon footprints
- All agree that change is needed, but many question the timeline for introducing these measures, preferring a more staggered approach, particularly in light of dwindling revenues following recent lockdowns
- Some question the impact of this policy change, arguing that more should be done to reduce the emissions associated with audience, talent & crew travel, logistics & waste
- All state that more education is needed to move away from a dependence on generator power & liquid fuels.
- Most are concerned that it is down to them to explain these cost increases to their clients; major fuel suppliers such as Crown Oil and Speedy Fuels do reference these policy changes, but let’s face it, how often do we really click through their web pages?
- Some fear that they will lose clients who cannot absorb the increase in fuel duty
- Many power contractors work with clients who have a fixed power budget that includes generation, distribution, crew and fuel; with the increase in fuel costs, these clients will expect discounts in other areas, which may affect the profitability of power contractors & their ability to invest in new renewable technology
- Cash flow will become a problem, particularly where large volumes of liquid fuel need to be pre-purchased on account and will not be paid for by the client until after the event
- Fuel security will become a greater issue, as opportunists will be more likely to steal white diesel as this can be used in vehicles
- Where power contractors hire to different markets, for instance both event clients who can only use white diesel & agricultural clients who are permitted to use red, tank cleaning costs will become an additional logistical overhead and will need to be policed rigidly
- On a positive note, event organisers may be more incentivised to integrate battery technologies for base load management, as the monetized fuel savings will make the hire of these hybrid systems cost neutral
Personally, I do welcome this policy change but it’s timing in light of the Covid pandemic is extremely challenging for our industry. I do also question the Government’s insistence on extending the taxation to biofuels. Whilst many of you know that I advocate energy efficiency over & above switching to biofuels, as we gradually transition to more ubiquitous mains power & high storage capacity battery systems, biofuels have a place to bridge the gap & help reduce the impact of our events.
Huge thanks to all my colleagues that took the time to contribute to this article, including Kevin Moore (Vision 9 and AIF), Colin Murphy (Great Run Company), Steve Heap (AFO), Michael Leaver (Manchester Pride), Shaun Pearce (Pearce Hire), George Nearn (Flying Hire Events), Rob Scully (ZAP Concepts) and Luke Howell (Hope Solutions).”
This guest blog originally appeared in the 2021 Vision: 2025 newsletter.