The government announced new fuel duty rules in the 2020 budget which will come into effect on 1st April next year. These rules mean the end of red diesel for a great many applications and sectors, including construction and manufacturing. The headline implication is that for every litre of diesel used an extra 46.81 pence is paid in fuel duty. There are some exceptions such as agriculture but these add another set of potential pit falls for fuel and rental suppliers.
There is a widespread belief or perhaps hope that there will be a last minute reprieve and these changes will be deferred on the basis that alternatives to plant that runs on red diesel or alternative fuel sources are not available or not competitive. There’s no indication from government that they intend to defer this major change although it doesn’t appear they have grasped the costs involved, A spokesperson for the DfT told Construction News that they are not increasing the budget for HS2 to take account of the increased fuel costs for contractors.
Not Just Cost
In the government policy paper laying out the details of these changes we’re told that:
“Registered fuel suppliers that switch a fuel tank from red to white diesel will need to flush out the tank and supply lines until no trace of marked rebated fuel remains. This will help to ensure compliance and minimise the risk that white diesel that has had the full duty rate paid on it is contaminated with the red diesel marker.”
This supports what we’ve been told about a proposed regime of site inspections based around tank dipping meaning that great care will have to be taken that equipment that has been run on red diesel for use in an exempt application will need to be properly flushed before it can be put out to another customer who has to run on white diesel. At least one of the generator rental suppliers we have spoken to has taken the decision to run their fleet exclusively on white diesel on the basis that loss of work to exempt sectors is simpler to deal with.
Fuel theft is already a serious problem on construction, drilling and other sites and fuel bowsers filled with white diesel are only going to be more attractive to fuel thieves which can only mean more issues from downtime caused but such thefts and increased security costs.
How Do We Respond?
Electric drive is part of the solution especially for industrial applications where power is likely to be available. At GenAir we already have electric drive compressors in our fleet and this offering is expanding with 30 more 400cfm electric machines being built over the coming weeks and another electric driver offering on test which will be ready to launch soon and our fleet of diesel generators are predominantly the most efficient tier 5 units.
For construction sites where no power is available there are a range of potential options moving forwards of which electric drive could well be a part. Larger generation capacity on site increasing efficiency and allowing more electrically drive plant to be used especially with hydrogen powered generators becoming available.
At GenAir we fully support the use of HVO fuels and it’s disappointing that, given these changes are aimed at CO2 reduction, HVO fuels are not subject to a duty rebate.
In the immediate term from April next year higher fuel costs appear to be inescapable for a great many users with construction hit particularly hard and with nowhere to go. As they current stand the government’s plans are all stick and no carrot.
Are you ready for the fuel duty changes?