UK set to cap revenue for low-carbon energy producers

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The “cost plus revenue limit” is part of a broader energy support package announced by the country’s new prime minister, Liz Truss, last month, which included a cap on the price of average household energy bills.

The package, which is called the Energy Prices Bill and gives the government new emergency powers to implement the proposals, was presented to parliament earlier today.

Gas prices skyrocketed in Europe and Britain following Russia’s invasion of Ukraine, which in turn drove up the cost of electricity.

Electricity prices are usually set by the gas, so the measure would apply to generators who sell their electricity at these skyrocketing prices but do not need to buy expensive fuel.

“Low-carbon electricity producers therefore benefit from abnormally high prices, while consumers have to pay significantly more for energy produced from renewable energies and nuclear, even if they often cost less to produce,” said said the Ministry of Business Strategy, Energy and Industry. BEIS) said.

Trade association RenewableUK said it feared the cap would send the wrong signal to renewable energy investors in Britain.

“A price cap acting as a windfall tax of 100% on renewable energy revenues above a certain level, while excess oil and gas profits are taxed at 25%, risks biasing investment towards fuels fossil fuels that have caused this energy crisis,” said Dan, CEO of RenewableUK. McGrail said in a statement.

“As such, to limit negative impacts, it is essential that a cap is set at a level that does not make the UK less attractive to investors than the EU (the European Union), is neutral technologically and has a clear sunset clause in place.”

Britain’s decision follows similar efforts in Europe where the European Commission has proposed setting a price limit of 180 euros per megawatt-hour (MWh) on the revenue these generators make from their electricity in the market.

No details were given on the expected income price limit for the UK scheme which would apply to producers in England and Wales.

BEIS said the measures would come into effect in early 2023 and it would launch a consultation with industry before announcing specific details on how its temporary “costlier revenue limit” would work.

(Reporting by Susanna Twidale and Muvija M; editing by David Evans)

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