As part of new government legislation, renewable energy generators and nuclear power plants will have their revenues capped.
The Energy Prices Bill, which aims to assist consumers and companies with rising energy bills this winter and beyond, will be tabled in the Commons on Wednesday.
However, the government disclosed late on Tuesday that the bill would also aim to “sever the relationship between high worldwide gas prices and the cost of low-carbon electricity” by enacting a new temporary “cost-plus revenue cap” in England and Wales.
The government claimed that the cost of gas determines the cost of power, so as gas prices rose over the past year, many of Britain’s wind farms and solar farms received far higher than usual payments for their output, despite the fact that their expenses had not changed.
Renewable firms were “benefiting from abnormally high prices, while consumers are having to pay significantly more for energy generated from renewables and nuclear, even though they often cost less to produce”, it said.
The government said it will undertake a consultation “shortly” and has been closely collaborating with the industry in advance of the revenue cap’s introduction at the beginning of 2023, although there is little information available about where the cap would be set.