In Regen’s first insight paper of 2023, director Johnny Gowdy analyses the emerging details of the government’s new Electricity Generator Levy (EGL):
“As more details of the new electricity generator levy (EGL) are released it is becoming apparent that the levy, which will run to 2028, is designed less as a temporary windfall tax and more like a super-tax to provide revenue for the Treasury. As such, it will deter investment in the renewable and low carbon technologies needed to meet the UK’s net zero targets.
To act as a targeted tax on windfall profits, the EGL should not apply to projects commissioned after 1 January 2023 and the timeframe should be reduced to a maximum duration of 18 months.”
Regen’s recommendations:
- Reduce the term of the EGL to 18 months, running until June 2024.
- Exclude new projects commissioned after 1 January 2023.
- Reconsider the £75 MWh figure to determine if it truly represents the threshold of exceptional revenue and is set at a level that will support future investment.
- Exclude all Community Interest Companies, Co-operatives, Associations and other legal entities whose main purpose is to use generation profits to provide community benefits.
- Include capital tax allowances to encourage investment in low carbon technologies.
- Link the EGL to a commitment to increase budget allowances for future CfD allocation rounds that are sufficient to deliver higher levels of renewable energy deployment consistent with achieving the UK net zero strategy and the decarbonisation of power by 2035.
- Continue to pursue an extension of CfD contracts to new and existing generators as a better long-term deal between consumers and generators to provide lower-cost energy in exchange for greater revenue certainty.
Read the full analysis of the proposals in the new insight brief by Regen’s director Johnny Gowdy here.
The EGL came into effect on the first day of 2023 following an announcement in the Chancellor’s Autumn Statement (read our initial brief on the key takeaways here.