A windfall tax on power generators in the UK could stifle investment in green energy just as the country needs it most, according to a trade body.
A duty on power generators that have gained from rising electricity prices would put potential new renewables projects at risk while prolonging dependence on expensive fossil-fuel imports, EnergyUK said in a document published Wednesday.
The government has signaled that a decision on whether to impose a windfall tax on power producers could be announced within weeks, after last month unveiling plans for a similar levy on oil and gas companies. Many generators have reported booming profits just as Britons grapple with the worst cost-of-living crisis in decades.
A levy on power firms could reduce incentives for future investment in Britain’s energy infrastructure, lead to even higher bills for consumers and delay key projects needed to reach net-zero goals, according to EnergyUK.
“Energy generation is a long-term industry, with investment horizons that span decades,” Adam Berman, the trade body’s deputy director, said in a statement. “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.”
The news last month that Chancellor of the Exchequer Rishi Sunak had ordered officials to prepare plans for a possible tax on power generators sent utilities’ shares tumbling. Power-plant operator Drax Group Plc sank 14% in one day, while energy firms SSE Plc and Centrica Plc both dropped more than 7%.
A senior minister reiterated Wednesday that the government is still considering its plans for the potential tax.
“It’s something that the chancellor is looking at and he’s looking at it at pace,” Exchequer Secretary to the Treasury Helen Whately said at a Confederation of British Industry conference in London.
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