The exemption will apply to projects that lead to:
- A new generating station;
- The replacement of generating plant of an existing station provided the whole or substantially the whole of the plant is replaced, i.e. repowering projects; and
- An increase in the generating capacity of an existing generating station.
HMRC guidance states that the exemption applies to new generation capacity through repowering, only where it involves the replacement of substantially all of the core generating equipment. An example indicates that the replacement of 25 of 30 turbines in a windfarm may be considered the replacement of ‘substantially’ all of the generating plant.
Where a project enhances the electricity generation capacity of an existing station it is only the additional generation which is treated as exempt. HMRC consider that the qualifying incremental generation should qualify for the exemption where the expansion transcends previous site boundaries, particularly where that involves the acquisition of new land/seabed interests or is subject to separate metering. HMRC distinguish between expenditure on new generation which results in increased megawatt (MW), versus enhancing the efficiency of assets, resulting in an increased output in MW hours or extended planned life. The latter would not qualify. The exemption also does not apply to refurbishment, general repair, maintenance or the replacement of parts as this would be considered part of an existing plan to maintain the plant, not an extension.
