Power firm windfall tax could ‘jeopardise’ cutting bills and carbon – Energy UK

The Chancellor has indicated he might extend the levy tax to some wind power generators, among others.

Some wind farms and solar farms would be hit by the potential new windfall tax (Danny Lawson/PA)
Some wind farms and solar farms would be hit by the potential new windfall tax (Danny Lawson/PA)

A windfall tax on the UK’s power generators might push up household energy bills in the long term, the industry’s trade body has warned.

Energy UK said if the Chancellor extends the tax on oil and gas companies to those who build wind turbines, he might “jeopardise” the path to cutting both bills and emissions.

“The next decade will be critical in ensuring sufficient investment to reach both our climate change and domestic energy security targets,” said Energy UK deputy director Adam Berman.

“Generation is a long-term industry, with investment horizons that span decades and a windfall tax on generators could delay and raise the cost of these investments – at the very time that we need to increase spending to meet the Government’s own aims.

“We need to make investment in cheap, clean, domestic generation easier – not harder – and with electricity demand set to double by 2035, a windfall tax would jeopardise our pathway to energy security, net zero, and reliable low-cost electricity.”

Chancellor Rishi Sunak put a 25% windfall tax on the companies that extract oil and gas from the North Sea last month.

But he also said that officials are examining how to extend this tax to other companies in the energy sector.

This could include firms that built wind farms before the introduction of the so-called Contracts for Difference (CfD) subsidy scheme over half a decade ago.

We need to be very careful of any actions that could inadvertently push up the cost of investing in new generation, forcing consumers to pay higher energy bills for longer

Adam Berman, Energy UK

Gas still accounts for a large proportion of the UK’s electricity generation, meaning that as gas prices spiked over the last year electricity has also become more expensive.

Therefore the price that customers pay for wind-generated electricity has also risen sharply, even though the costs for running a wind farm have remained largely unchanged.

This is not a problem for CfD-based wind farms. They are guaranteed a price for every megawatt hour they produce, so if the price is below that point their payments are topped up, and if it rises above that point they have to pay back the difference.

Instead it is the money made by older wind farms, and other generators in similar positions, that the Chancellor is now thinking he might target.

But critics have said this could be damaging for a sector that needs more investment than it has seen in decades to help the UK decarbonise.

If homes are to be heated and cars run on green electricity, hundreds of billions of pounds will be needed for new wind and solar farms and other technology.

Energy UK said that the industry is investing more than £100 billion this decade bringing new sources of energy online.

“Customers are facing a cost-of-living crisis that has been driven by international gas prices, so while the support package announced recently was very welcome we also need to be very careful of any actions that could inadvertently push up the cost of investing in new generation, forcing consumers to pay higher energy bills for longer,” Mr Berman said.

“Generators have already invested billions of pounds of investment and, given the right framework, are ready to deliver billions more to help the country reach its climate change targets and reduce our dependence on the volatile fossil fuel prices that are causing record energy costs for customers at present.”

Register for free to continue reading

Registration is a free and easy way to support our truly independent journalism

By registering, you will also enjoy limited access to Premium articles, exclusive newsletters, commenting, and virtual events with our leading journalists

Please enter a valid email
Please enter a valid email
Must be at least 6 characters, include an upper and lower case character and a number
Must be at least 6 characters, include an upper and lower case character and a number
Must be at least 6 characters, include an upper and lower case character and a number
Please enter your first name
Special characters aren’t allowed
Please enter a name between 1 and 40 characters
Please enter your last name
Special characters aren’t allowed
Please enter a name between 1 and 40 characters
You must be over 18 years old to register
You must be over 18 years old to register
Opt-out-policy
You can opt-out at any time by signing in to your account to manage your preferences. Each email has a link to unsubscribe.

By clicking ‘Create my account’ you confirm that your data has been entered correctly and you have read and agree to our Terms of use, Cookie policy and Privacy notice.

This site is protected by reCAPTCHA and the Google Privacy policy and Terms of service apply.

Already have an account? sign in

By clicking ‘Register’ you confirm that your data has been entered correctly and you have read and agree to our Terms of use, Cookie policy and Privacy notice.

This site is protected by reCAPTCHA and the Google Privacy policy and Terms of service apply.

Register for free to continue reading

Registration is a free and easy way to support our truly independent journalism

By registering, you will also enjoy limited access to Premium articles, exclusive newsletters, commenting, and virtual events with our leading journalists

Already have an account? sign in

By clicking ‘Register’ you confirm that your data has been entered correctly and you have read and agree to our Terms of use, Cookie policy and Privacy notice.

This site is protected by reCAPTCHA and the Google Privacy policy and Terms of service apply.

Thank you for registering

Please refresh the page or navigate to another page on the site to be automatically logged inPlease refresh your browser to be logged in