Rishi Sunak, when he was still chancellor and was coming round to the idea of a windfall tax, noticed a key point about today’s energy market. Not all the corporate winners in the UK from soaraway wholesale gas prices are producing hydrocarbons in the North Sea. Some are generating power from nuclear power stations, solar projects, windfarms and biomass and are enjoying the same high wholesale prices.
Those generators are benefiting from old-style contracts based on “renewables obligation certificates” (ROCs) and suchlike, rather than contracts-for-difference (CfD) arrangements that have been the main way of incentivising capacity in recent years. Under CfDs, excess revenues over the agreed “strike” price flow to the Treasury. That is not the case with ROCs, thus some spectacular improvements in corporate fortunes; the share price of biomass-heavy Drax is up two-thirds in the past 12 months, for instance.
