(Bloomberg) — A one-off tax on electricity generators in the UK could stifle investment in green energy just when the country needs it most, according to a trade body.
A tax on electricity generators who have profited from rising electricity prices would jeopardize potential new renewable energy projects while prolonging dependence on expensive fossil fuel imports, EnergyUK said in a document released Wednesday.
The government has signaled that a decision on whether to impose a windfall tax on electricity generators could be announced within weeks, after unveiling plans last month for a similar tax on oil and gas companies. Many producers have reported booming profits just as Britons are grappling with the worst cost of living crisis in decades.
According to EnergyUK, a tax on electricity companies could reduce incentives for future investment in UK energy infrastructure, lead to even higher bills for consumers and delay key projects needed to meet net zero targets.
“Power generation is a long-term industry, with investment horizons that span decades,” Adam Berman, deputy director of the trade body, said in a statement. “A windfall tax on generators could delay and increase the cost of these investments just when we need to increase spending to meet government targets.”
News last month that Chancellor of the Exchequer Rishi Sunak had ordered officials to prepare plans for a possible tax on electricity generators sent utility stocks plummeting. Power plant operator Drax Group Plc fell 14% in one day, while energy companies SSE Plc and Centrica Plc both fell more than 7%.
A senior minister reiterated on Wednesday that the government is still considering its plans for the potential tax.
“It’s something the Chancellor is looking at and he’s looking at it at pace,” Exchequer Secretary to the Treasury Helen Whately told a Confederation of British Industry conference in London.
(Updates with relevant utilities in sixth paragraph.)
©2022 Bloomberg LP