RenewableUK and RWE have expressed concern that the government’s proposed so-called cost-plus revenue limit on wind and solar projects will send the wrong signal to investors.
The trade group’s chief executive Dan McGrail said the scheme, being touted as part of London’s Energy Prices Bill, comes at a time when the country needs to attract £175bn in investment in wind.
RWE reacted “with disappointment” at the Government’s decision to implement a revenue limit on low-carbon technologies.
The Government has announced it will legislate for a Cost-Plus Revenue Limit, which will act as a cap on revenue renewable generators can receive.
Officials are proposing that the Cost-Plus Revenue Limit will apply to renewable generators that are outside of the fixed-price Contracts for Difference (CfD) scheme – mainly older wind and solar energy projects – and will consider whether it will apply to nuclear and biomass generation.
“We are concerned that a price cap will send the wrong signal to investors in renewable energy in the UK,” said McGrail.
“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.
“This decade we need to attract £175bn of investment in secure, domestic wind power and we can already see the investor turmoil that the EU’s proposed price cap is causing in the European market. Industry will continue work with Government on policies to help cut consumer bills and safeguard investment.
“As such, to limit the negative impacts, it is essential that a cap is set at a level that doesn’t make the UK less attractive to investors than the EU, is technology neutral and has a clear sunset clause in place.”
McGrail added that wind generators sell their power a year or more in advance at prices that are a fraction of the record high market prices being set by gas.
“These hedging arrangements for wind power will help to keep electricity prices lower for consumers this winter, and the price cap must not undermine these arrangements,” he said.
Meanwhile he said industry has been proactive in proposing new fixed price contracts to cut costs and provide long-term, low-cost power for consumers.
“We welcome the inclusion of this proposal in the Bill, and it is vital that the scheme is developed rapidly so that industry can plan for new contracts and consumers can be confident that they are getting maximum benefit from cheap renewables.”
Tom Glover, RWE UK country chair added: “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 on low-carbon technologies.
RWE said, if designed and implemented correctly, the cap could have severe negative consequences for investment in the renewable and wider energy market and so for the energy transition.
Glover continued: “We welcome that the government will consult on the Cost-Plus Revenue Limit proposals, and we will work constructively with them to minimise any adverse consequences that could arise as a result of a revenue cap.
“It is critical that any cap is applied in such a way that does not severely impact on investor confidence and maintains the UK electricity sector as an attractive place to invest, given the estimated £90bn required by 2030 to make the UK more energy independent and to achieve net zero.
“Furthermore, it is important the cap does not interfere with the efficient functioning of the wholesale market given the potential security of supply challenges we are facing in the UK this winter.”