17 November 2022
If you are covering the introduction of a windfall tax on low carbon electricity generators, please find below a comment from Tom Gilby, equity research analyst at Quilter Cheviot:
“Low carbon electricity generators are now firmly in the crosshairs for the government with the introduction of a 45% windfall tax. This recognises that they have so far gone under the radar in being beneficiaries of rising energy prices along with a stable cost base.
“Some energy generators, such as SSE, have been more vocal than their oil and gas counterparts in protesting against a windfall tax and the impact it could have on investment, but this was always likely to fall on deaf ears for as long as extraordinary profits were made in this cost of living crisis. The headline rate of 45% appears harsher than the one on the oil and gas producers at first glance and they could feel hard done by given the level of investment in clean energy and the lack of share buybacks. However, there is a nuance here in that it is on profits over a certain level as it tries to keep some semblance of an innovative industry. It remains to be seen how much of this investment will ultimately be threatened, but with this windfall tax landing at the same time as interest rates and inflation raising the cost of funding new projects, it could be more detrimental than when first designed.
“The government does need to be careful here that it does not choke off any of the transition to clean energy. Hunt spoke of the importance of energy independence via clean energy sources and thus the impact of this windfall tax will need to be monitored closely, otherwise the transition to net zero could be put in doubt.”
