- Planned renewables price cap sinks sector
- UK cap seen lower than European equivalent
- Renewables firms threaten to cut investment
Shares in gas and electricity distributor Centrica (CNA) hit their lowest level this year, falling almost 5% to 67.5p in early trading, after it was reported the government was planning to cap prices on renewable energy.
Shares in rival utility Drax (DRX) were also lower, while renewables funds dropped sharply with NextEnergy Solar (NESF) tumbling 11% by midday.
SHOCK MOVE
According to a report in the Financial Times, ministers are drafting plans for a temporary cap on the revenues renewable companies generate from soaring wholesale power prices.
The industry has warned that the cap should be less punitive than the European cap or the UK risks an ‘investment exodus’.
Under the European Union’s plans, non-gas generators have to cede any revenues they make over €180 (£158) per megawatt hour to their respective governments.
Firms which own solar and onshore wind farms have made abnormally large profits on the electricity they sell to the grid on top of the state subsidies they already receive.
Companies which operate offshore wind farms are subject to a different tariff regime known as ‘contracts for difference’ which limits the price they can charge.
SIZEABLE INVESTMENT
According to the newspaper, the government’s starting point for negotiations on a renewables price cap was between £50 and £60 per megawatt hour, significantly below the European price cap.
Centrica, historically a popular stock with retail investors due to its attractive dividend yield, is a major operator of wind and solar assets and as such could lose a portion of its revenues under the planned cap.
Investment in energy supply the UK and Ireland is expected to be as much as £200 billion between 2021 and 2030 with the majority dedicated to renewable, low-carbon technologies such as wind and solar.
