Wednesday 12 October 2022

Has industry welcomed UK plan to cap renewable energy profits?

Has industry welcomed UK plan to cap renewable energy profits?

Last night, the government unveiled a plan that could see revenues from renewable energy generators and nuclear plants capped.

The move is expected to hit the profits of large renewables groups, including SSE and ScottishPower, that generate from record-high wholesale prices.

Was this plan welcome news for the industry?

Risk of hurting green investment 

Responding to the government's new Energy Prices Bill, Energy UK’s Director of Advocacy, Dhara Vyas said: "We must be sure that the proposed mechanism does not risk the very investment the UK needs to ensure long term, sustainable economic growth.

"We look forward to continuing to work with Government to ensure that any new mechanism is introduced in a way that encourages investment in low carbon generation, rather than deterring it. This, alongside improved energy efficiency, will reduce our reliance on volatile gas prices in the long-term, as well as boost our economy."

Wrong signal to investors 

Dan McGrail, Chief Executive of RenewableUK, said: "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% windfall tax on renewables' revenue above a certain level, while excess oil and gas profits are taxed at 25%, risks skewing investment towards the fossil fuels that have caused this energy crisis."


Keith Anderson, Chief Executive of ScottishPower, commented: "We are deeply worried at the suggestion renewables generators are making extraordinary profits when our power has been sold in advance at much lower pre-war prices - a fraction of today's cost - protecting customers by hundreds of millions of pounds.

"It's disappointing that such a significant market intervention by the government has come with so little detail; all this does is create uncertainty."

Cap should be comparable to other countries

An SSE spokesman said: "Any revenue cap must be set at a level that doesn't discourage essential investment in the UK's renewable energy sector and, therefore, should be comparable to other countries, particularly given the 180 euros cap being implemented by the EU.

"It is also vital that the cap does not negatively impact on security of supply this winter; therefore flexible technologies, such as hydro, that require strong price signals to meet demand when most needed should be excluded.

“We will now work with the government on the details of the policy to ensure it meets its objective of addressing extraordinary profits without throwing away the UK’s global leadership position on renewable energy investment.”

A cap is a de-facto windfall tax

Tom Glover, RWE UK Country Chair, said: "RWE understands that this is a very difficult time for energy consumers and businesses and we have fully supported government efforts to help with energy bills.

"However, we are disappointed that the government has chosen to implement a revenue cap (the Cost-Plus Revenue Limit) on low carbon technologies.

"Effectively, a cap is a de-facto ‘windfall tax’ on low-carbon generators that, if not designed and implemented correctly, could have severe negative consequences for investment in the renewable and wider energy market and so for the energy transition.

"RWE continues to believe that voluntary Contracts for Difference are the most efficient and investor-friendly mechanism to ‘de-link’ the electricity price from the marginal gas price and that these could be implemented relatively quickly."

Written by

Bruna Pinhoni

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