UK Renewable Energy Firms warn, Government Plan for Price Cap is Risky

Power & Energy

The government of the United Kingdom is all set to cap the price of electricity from older nuclear and renewable facilities as early as this week. The new plans of the UK government could hit the profits of energy companies including Scottish Power, SSE, EDF Energy, and RWE.

The energy companies are concerned that further price limits could affect the reputation of the United Kingdom as a stable regulatory environment and deter investment in the future. The heads of energy companies will discuss their concerns with the UK government.

Currently, the price of electricity produced in older facilities is linked to the overall cost of gas. This is different at newer energy facilities, which manufacture power at an agreed price. In previous years, electricity produced by gas had been the cheapest.

The nuclear and renewable energy producers are making very significant excesses because the price of gas has rocketed, but the costs of energy production have not. The profits have prompted calls for a windfall tax on the renewable firms.

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The electricity producers are lobbying hard against the new price cap, and warn that an intervention has several risks. The price cap also decreases the incentive for energy retailers to purchase in advance, thus creating a less predictable, and more volatile market.

Sandy

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