The UK government, through the Department for Energy Security and Net Zero (DESNZ), has set a series of measures to decouple the electricity prices from gas market volatility.
Two of the main measures are a voluntary long-term fixed contract and an increase in the renewables windfall tax – also known as The Electricity Generator Levy (EGL) –, which will increase from 45% to 55% starting from 1 July 2026. The EGL was introduced in 2023 as a temporary tax on older large renewable energy plants based on their annual revenue above a benchmark price of currently at £82.61/MWh.
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The UK government aims to extend the windfall tax past its original end date of 2028, however it has not announced how long it will extend it. New investments in renewable energy projects are not subject to the EGL.
Increasing the windfall tax will also affect the other main measure outlined by the UK government, the voluntary wholesale Contracts for Difference (WCfD). According to the Exchequer Secretary to the Treasury, Dan Tomlinson, increasing the windfall tax will “encourage participation at a competitive price” in the WCfD that will be introduced later this year, with the intention to run an allocation process in 2027.
UK Chancellor, Rachel Reeves, said: “Alongside moving generators onto the competitive pricing assured through wholesale Contracts for Difference, increasing the EGL to 55% will help to break the link between high gas prices and high electricity prices – offering households and businesses stronger protection against future energy shocks.”
The measures are in response to the ongoing conflict in the Middle East, which has negatively affected gas prices, as nearly 30% of Britain’s renewable generation is still exposed to wholesale gas prices.
Project and grid planning overhaul
Furthermore, the DESNZ also outlined other measures to be implemented in order to reduce electricity bills, which will impact the solar PV industry. Chief among the other measures is the overhaul of planning, land access and grid connection processes.
Other measures also include unlocking up to 10GW of solar PV and wind power across the Public Estate – including using brownfield land, industrial sites and railway sites – or giving further support to Great British Energy, the publicly owned energy company, to install more solar rooftop on a further 100 schools and colleges this year.
This comes a little bit over a month after Great British Energy reached 100 UK schools with installed solar PV.
This article was originally published on our sister-site Solar Power Portal.
