Shares in renewable energy companies and British Gas owner Centrica PLC (LSE:CNA) both fell sharply on news that Chancellor Rishi Sunak is looking to apply a windfall tax on electricity generators as well as on oil and gas producers.
Treasury officials have been asked to work out plans for a windfall tax on more than £10bn of excess profits to all electricity generators, including clean energy companies such as wind farm operators, according to a report in the FT.
Looking to raise funds to support households hit by the surging cost of living, especially energy prices, the Chancellor is looking to broaden the net of a potential windfall tax to companies that have made higher profits thanks to higher energy prices.
Drax Group (LSE:DRX) PLC, the Yorkshire producer of coal and biomass energy, saw its shares tumble 15%, while British Gas owner Centrica PLC (LSE:CNA) was down 11%.
SSE PLC (LSE:SSE), which closed its last coal-fired plant in 2020 but still runs a gas-powered plant as well as its growing network of renewables operations, was down 8.7%.
Wind farm operators and solar farm investment companies were also in the red, with Greencoat UK Wind down 5% and NextEnergy Solar Fund down 2.6%.
Analysts at AJ Bell said: “While it is right that some support should be given to those most in need during these difficult times, the way in which new funds are raised means the Government runs the risk that energy companies slow down investment in new green projects which could make it harder for the country to hit its net zero emissions targets."