The EU’s energy windfall tax gives UK ministers a yardstick for their talks

theguardian.com:

The European Union’s big move on energy companies’ excess profits arrived with a big number: €140bn (£121bn) to be raised via a windfall tax, with the lion’s share coming from generators who are the accidental beneficiaries of high gas prices. Does it put the UK’s efforts to shame?

Well, up to a point. The EU has definitely been bolder in making its levy on generators upfront and compulsory: a revenue cap will be set at €180 a megawatt hour, with the excess going to member states. Assuming the proposal is adopted, there will be no wriggle room.

But the obvious drawback is that the EU hasn’t designed its measures on a fuel-by-fuel basis. A cap at €180 squeezes coal plants whose input costs have also risen, but it is still extremely generous towards nuclear plants and windfarms, whose costs are fixed and substantially lower. Member states can set lower thresholds if they wish, but that’s for the future.

The UK’s non-windfall tax approach, remember, is to negotiate with nuclear, wind, solar and biomass generators to secure lower wholesale energy prices quickly – albeit at the risk, as many have pointed out, of giving away too much future value via new contracts for difference.

“If I was sitting in Whitehall preparing to negotiate with the UK companies, I would be pleased that the EU has done it,” says the independent energy analyst Peter Atherton. “But I would be worried that they have set the cap so high, and not designed it on a fuel-by-fuel basis.”

In other words, there is now a read-across figure for the UK to aim at. But there is still scope to craft a more finely tuned package that applies different prices to different forms of local generation. We’re not much further on: UK ministers still need to be aggressive – and