Shares of the company that is converting the UK’s biggest coal-fired power station to biomass have plunged.

Drax Group’s stock tumbled 28%, which is said to be the lowest since it started trading in 2005.

It comes after the government announced it would scrap the Climate Change Levy exemption for renewable electricity, which means clean power developers will have to start paying a climate change tax.

Chancellor George Osborne made the announcement in his Summer Budget statement yesterday.

Renewable generators currently receive levy exemption certificates, worth around £4/MWh, providing an additional source of income on top of electricity generation revenues.

Drax has so far converted two of its six units to burn wood pellets and plans to bring a third unit online next year.

The company said the move could reduce its revenues by around £30 million this year and £60 million in 2016.

CEO Dorothy Thompson added: “We are surprised and disappointed at this retrospective change to a support regime which has been in place since 2001 specifically to encourage green energy and support renewable investment.”

Last month Drax said it expects to save 20 million tonnes of carbon emissions by July after replacing coal with biomass.