Cap plan for renewables ‘a form of windfall tax’
Labour said the UK government has been forced to accept the principle of a windfall tax after ministers outlined plans to cap the revenue of renewable energy generators and nuclear power plants.
The move could hit the profits that energy companies, such as SSE and Scottish Power, generate from record-high wholesale power prices.
Ministers say the proposal would ensure consumers and businesses pay a fair price for energy.
Wholesale electricity prices are set by gas-fired generation. With the price of gas rising sharply in recent months some renewable firms have made big profits.
Energy bosses say the cap plan – due to be introduced in the House of Commons on Wednesday as part of the Energy Prices Bill – could put off investors.
There is little detail about how the revenue cap would work, but the Department for Business, Energy and Industrial Strategy said it would launch a consultation shortly.
It is expected the legislation could come into force in England and Wales at the start of next year, while the government is consulting with the Scottish government.
Business and Energy Secretary Jacob Rees-Mogg said: “Businesses and consumers across the UK should pay a fair price for energy.
“We have been working with low-carbon generators to find a solution that will ensure consumers are not paying significantly more for electricity generated from renewables and nuclear.”
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Labour claimed the proposal showed the Conservatives has accepted the principle of a windfall tax on excess profits of electricity generators.
Shadow Climate Change Secretary Ed Miliband said: “After months of telling the country they were utterly opposed to the principle of a windfall tax, they have been dragged kicking and screaming to implement it.”
Dan McGrail, chief executive of RenewableUK, said that the move risks sending the “wrong signal” to investors in renewable energy in the UK, and skewing investment towards fossil fuels.
Keith Anderson, chief executive of Scottish Power, said: “It’s disappointing that such a significant market intervention by the government has come with so little detail. All this does is create uncertainty.
“This crisis has been caused by the cost of gas and it’s strange the proposed solution is to cap the price of low-carbon generation and to leave the gas sector untouched.”
The former Chancellor Rishi Sunak was pressured into introducing an Energy Profits Levy on the UK oil and gas sector on 26 May.