The government has come under fire for proposing a revenue cap on low carbon generators. 

As part of new government legislation, the Energy Prices Bill, renewable energy generators and nuclear plants face a cap on their revenues.

In a briefing document published today, Energy UK describes the revenue cap proposal as a “de facto windfall tax” that threatens to be more “damaging” and “punitive” than that levied on oil and gas producers.

The trade association points out that the oil and gas investment allowance is predicted to divert up to £25 billion from tax and into new UK fossil fuel extraction annually.

It notes that if the same investment allowance were given to low carbon generators, it would facilitate investment equivalent to that needed to deliver an extra 9GW of offshore wind a year.

This would produce enough electricity to power seven million homes and save £7 billion on customers’ bills.

Last week, some of the biggest energy companies in the UK sent a letter to the Business Secretary – energy firms said they were “alarmed” to see that clauses in the bill propose extensive powers for ministers.

Energy UK has urged policymakers to reconsider the design of the scheme that “could end up diverting investment away from the homegrown low carbon generation”.

Energy UK’s Deputy Director Adam Berman said: “While we fully support the need to do whatever it takes to help with bills this winter, the government’s revenue cap as currently designed could have catastrophic consequences for the investment needed to reach our climate and energy security targets.

“It’s astonishing that the government has proposed a scheme that would penalise investment in clean, cheap, low carbon generation in favour of polluting oil and gas extraction.”

ELN contacted the Department for Business, Energy and Industrial Strategy – the department did not respond before publication.