Business secretary Jacob Rees-Mogg has launched plans for a cap on revenues of low-carbon electrical energy turbines, in what successfully quantities to a brief windfall tax on the sector’s income.
Labour stated that prime minister Liz Truss had been “dragged kicking and screaming” into the U-turn, after months of resisting its requires additional levies on the extraordinary income being made by the power firms.
Reports recommend that the cap may restrict costs to as little as £50-£70 per megawatt hour – in comparison with present costs of round £500 – with the federal government taking as a lot as 90 per cent of wholesale revenues above this stage.
Mr Rees-Mogg’s enterprise division declined to substantiate figures, that are topic to session. But they stated the scheme had “the potential to save billions of pounds for British bill-payers, while allowing generators to cover their costs, plus receive an appropriate revenue”.
But business physique Renewable UK stated that, as designed, the scheme would primarily influence on older wind and photo voltaic power initiatives, however voiced concern that it may skew future funding in direction of fossil gas power sources.
RenewableUK’s CEO Dan McGrail stated: “We are concerned that a price cap will send the wrong signal to investors in renewable energy in the UK. A price cap acting as a 100 per cent windfall tax on renewables’ revenue above a certain level, while excess oil and gas profits are taxed at 25 per cent, risks skewing investment towards the fossil fuels that have caused this energy crisis.
“This decade we need to attract £175bn of investment in secure, domestic wind power and we can already see the investor turmoil that the EU’s proposed price cap is causing in the European market.
“To limit the negative impacts, it is essential that a cap is set at a level that doesn’t make the UK less attractive to investors than the EU, is technology neutral and has a clear sunset clause in place.”
Ministers have been on the lookout for means to rein in unprecedented income being comprised of nuclear, wind and solar energy, which end result from the truth that their costs are tied to fuel, which has rocketed in value because of Russia’s invasion of Ukraine.
Ms Truss had beforehand resisted Labour’s name for an extension of the windfall tax imposed by former chancellor Rishi Sunak on North Sea oil and fuel producers, insisting that any such levy would deter future funding.
Shadow local weather change secretary Ed Miliband stated: “The government has finally accepted the principle of Labour’s call for a windfall tax on excess profits of electricity generators. 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.
“Yet again this shows Labour leading the agenda in British politics with another screeching U-turn from a government in office but not in power. But the government’s delay in acting will have cost billions and the public will pay the price.
Friends of the Earth’s head of policy Mike Childs said: “While it’s wrong for any energy supplier to be making excess profits at the expense of consumers, Liz Truss’s government appears to be coming down harder on green energy companies than the fossil fuel giants.
“Any windfall tax or similar measure on renewable energy companies has to be designed to motivate additional renewable energy investment – not discourage it.
Shares in energy companies have taken a hit since the Financial Times reported last weekend that a revenue cap was under consideration.
Business department insiders insisted that the “cost-plus revenue limit” isn’t a windfall tax, because it applies solely to extra revenues ensuing from uncommon buying and selling circumstances, and to not all income.
It is known that it’s going to apply to low-carbon producing belongings not at the moment lined by a contract for distinction and will likely be utilized in England and Wales from the beginning of 2023. It will stay in place till markets return to regular.
The announcement was made as the federal government launched its Energy Prices Bill to place into legislation the assist supplied to households and companies final month by Ms Truss.
The bundle caps common annual family payments for fuel and electrical energy at round £2,500 for 2 years, at a value estimated at £60bn over its first six months.
Mr Rees-Mogg stated: “Businesses and consumers across the UK should pay a fair price for energy. With prices spiralling as a result of Putin’s abhorrent invasion of Ukraine, the government is taking swift and decisive action.
“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.
“That is why we have stepped in today with exceptional powers that will not only ensure vital support reaches households and businesses this winter but will transform the United Kingdom into a nation that offers secure, affordable and fairly-priced home-grown energy for all.”