Green groups oppose Government plans to cap renewable revenues
Green groups have raised red flags over Government plans to cap the revenues enjoyed by established domestic renewable projects.
Environmental think tank Green Alliance argued that if established renewable sites were going to have their revenues slashed, then the plans had to be consistent and include nuclear projects and an expansion of the Energy Profits Levy on oil and gas operators.
Dustin Benton, policy director at Green Alliance, said: “If the government is going to cap the windfall profits of legacy renewables, then it needs to do the same for older nuclear power stations and introduce an expanded windfall tax on the oil and gas industry. Otherwise, the tax system will be deterring investment in cheap and clean energy in the UK that can help to bolster energy security and permanently reduce people’s energy bills.”
Cara Jenkinson, Cities Manager at climate group Ashden feared a clampdown would discourage renewable expansion, when the UK needs “maximum investment” in green projects.
She also suggested the Government should focus more on constraining the earnings of fossil fuel groups, which have climbed to record highs over the first two quarters of 2022.
Jenkinson argued “This will discourage further investment in clean domestic energy which is totally counter to what is needed for domestic fuel security, for supporting people facing unmanageable fuel bills and to meet our climate change commitments.”
Downing Street has been pushing electricity generators to accept new less lucrative 10-15 year deals well , and ditch their lucrative renewable obligation contracts (ROCs).
However, with both sides failing to find an agreement, the Government is set to step in with limits on the revenues they can make.
The Government has been approached for comment.
Revenue cap follows weeks of frustrated talks
Ministers have been concerned at the scale of earnings enjoyed by electricity generators which are still benefiting from renewable obligation certificates (ROC) – a subsidy scheme established in 2002 when the renewable industry was in its infancy.
Generators under legacy ROCs (the scheme was closed to new applicants in 2017) are paid a hefty subsidy by the Government on top of the current wholesale price, which has been driven by record gas prices.
Nuclear plants and renewable generators with ROC deals produce around 40 per cent of the UK’s electricity.
This contrasts with newer renewable offshore wind projects, which are governed under the “contracts for difference” system.
This limits the price they receive for their output, although agreements cover less than 20 per cent of total renewables capacity in Britain.
The Government’s proposed temporary revenue cap would be comparable similar in nature to the one already outlined by the European Union (EU) as part of efforts to lower wholesale energy prices, according to the Financial Times.
Under the EU’s plans, non-gas generators are required to pay member states the “excess profits” they generate beyond a threshold of €180 per megawatt hour.
Legislation, which would be needed to institute a cap, is expected as early as this week.
However, companies generating power from wind and solar including EDF Energy, RWE, Scottish Power and SSE have been resistant to the proposals, .
These firms have since urged the Government not to make any measures more stringent than EU legislation, fearing that the caps will be as significant a windfall tax to their earnings.
Prime Minister Liz Truss previously said she is ideologically opposed to further windfall taxes, although she has maintained the 25 per cent levy on North Sea oil and gas producers unveiled by former Chancellor Rishi Sunak.
He had considered expanding the windfall tax to renewable generators, but stopped short of doing so in hope that talks between both parties would be successful.
Industry group Energy UK has calculated that shifting renewable generators from ROCs to a contracts for difference scheme could reduce energy bills by between an estimated £10.8-£18bn per year, which would equate to a £150-£250 saving for a typical household.