Jacob Rees Mogg, business secretary, has proposed a cap on the revenues of low-carbon electricity generators. This effectively amounts to a temporary tax on the sector’s profits.
The government could cap the revenues of nuclear power plants and renewable energy generators.
This could impact the profits that energy companies like SSE or Scottish Power can make from record-high wholesale electricity prices.
Ministers believe the proposal will ensure that consumers and businesses are paid a fair price for their energy.
However, energy executives warn that investors could be put off by the plan because there are so few details.
The UK’s wholesale electricity prices are currently set by gas-fired generators.
How wind farms turned into huge money-spinners because of the energy price crisis
Some nuclear power plants, and solar and wind farms have seen huge profits as a result of the rising price of gas.
This is not the case at modern facilities that produce power at a fixed price.
As part of the Energy Prices Bill, the temporary cap that will limit generators’ output is due to be introduced in Parliament on Wednesday.
The government did not provide any details about the price limit for renewable energy companies’ revenues in its announcement.
Before introducing the revenue cap at the beginning of 2023, the government announced that it would hold a consultation.
On 26 May, a windfall tax was implemented on the UK’s oil and gas sector. It is known as a 25% Energy Profits Levy. This applies to British fossil fuels.
According to renewable energy companies, the proposed UK cap on their revenues amounts to a windfall income tax. Prime Minister Liz Truss said that she is opposed to it.
The cap is not retroactive to a traditional windfall tax. It will only be applied to excessive profits made in renewable energy companies.
Instead, the cap will be a tax on revenues exceeding a certain limit that is set by the government.
