UK chancellor announces 45% windfall levy on low-carbon generators

UK chancellor Jeremy Hunt announced a 45% levy on low-carbon electricity generators as part of his autumn statement on Thursday.

In response to profits derived from the unexpected energy price rises, the UK government will also increase the Energy Profits Levy to 35% from 25% from January 1, 2023 until March 2028.

It expects to raise a combined GBP 14 billion ( USD 16.5bn/EUR 16bn) from these measures next year.

Although the new 45% tax is called Electricity Generator Levy, it will be applied to extraordinary returns from low-carbon electricity generation from January 1, 2023 through March 2028. Targeted will be revenues from average prices above GBP 75 per MWh. “The tax will be limited to generators whose in-scope generation output exceeds 100 GWh across a period and will only then apply to extraordinary returns exceeding GBP 10 million,” the autumn statement reads.

The tax will be legislated for in the spring finance bill.

Following the announcement industry group RenewableUK warned that the new windfall tax could damage investment in much-needed new renewable energy projects.

“Unlike in oil and gas, under this levy companies which are making significant investments in renewables will get no tax relief and will be hit by a higher windfall rate,” said RenewableUK chief executive Dan McGrail.

"Any new tax should have focussed on large, unexpected windfalls right across the energy sector, instead profits at fossil fuel plants are inexplicably exempted from the levy,” he added.

The Association for Renewable Energy and Clean Technology (REA) said the government’s autumn budget sends wrong signals to investors.

“While the REA and its members recognise the immense economic challenges facing this country, we would question the wisdom of subjecting the cheaper, greener renewable power sector to a more punishing tax system than its oil and gas counterparts,” said REA director of policy Frank Gordon.

(GBP 1 = USD 1.180/EUR 1.143)

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