Future electricity market mechanisms for renewables are the subject of the REMA consultation which closed in October. The consultation is complicated and wide ranging. Much of it is  to do with the supply and aggregator sector, not directly with generation but we will feel the consequences. Market reform is likely to take some years. Read CfR’s response to the consultation below.

CfR response to 2022 REMA consultation

Following 2 months of uncertainty around the Energy Prices Bill, it seems the Government will not implement it. Instead, an alternative revenue tax has been set out in the November ’22 Budget. The de-minimis revenue and generation thresholds mean it will not impact community energy.

 

•  45% levy will be applied only to ‘exceptional generation receipts’ which is revenue from the sale of electricity (covering most forms of electricity sale, but excluding ROCs) at prices above £75/MWh – the levy will not be applied to the first £75/MWh earned. 
•  There is a ‘de minimis’ threshold of 100GWh per annum, so that only corporate groups/standalone companies which generate more than this amount will be affected at all by the levy. 
•  There is an ‘Allowance’ of £10m per annum for each group, so if you receive less revenue than that in a year you will not be charged the levy. 

The revenue tax brings the levy on renewables close to the additional levy on gas extraction. However, the levy on gas producers is tax on profit not revenue and they get a 92% rebate if they reinvest it in pumping more gas out of the ground.

The Government is right to seek to recover the cost of the consumer price cap from the energy sector, which is making super profits off the back of the war in Ukraine at the expense of households and businesses. The renewables industry should be prepared to give up super profits in return for a long-term price stability, accelerated investment in upgrading the electricity grid, investment for housing retrofit, supply chain development and skills training etc. For community and local energy I would add a viable framework that enables us to supply low cost power directly to our communities. And, the burden should be shared at least equally with the fossil fuel sector. 

For an excellent explanation of fossil fuel taxes and reliefs see this post from E3G.