The UK government has announced an immediate increase in the electricity generator levy from 45% to 55%, alongside a new scheme offering voluntary long-term fixed-price contracts to qualifying renewable generators.
Officials said the package is designed to lessen the pass-through of volatile gas prices to consumer electricity bills. According to the government, the measures will apply to around a third of Britain’s power supply.
One element of the plan is a new class of voluntary contracts, branded Wholesale Contracts for Difference. These contracts will be offered to existing low-carbon generators that are not currently operating under fixed-price arrangements. The government plans to launch the contracts later this year, with an allocation process scheduled for 2027.
The increase in the electricity generator levy takes effect immediately. The levy targets excess profits made by electricity generators.
Taken together, the announced steps combine an elevated levy on surplus generator earnings with an option for certain low-carbon producers to secure long-term, fixed wholesale prices under the Wholesale Contracts for Difference framework. The government framed the measures as a response to the transmission of gas market volatility into electricity costs paid by consumers.
Details on participation criteria for the voluntary contracts and on the mechanics of the 2027 allocation process were not included in the announcement. The measures will directly affect those parts of the power system comprising roughly one-third of overall supply, while the remainder of Britain’s generation mix will not be covered by the new contractual offers under the terms described.
Context and next steps
The government will implement the higher levy immediately. The Wholesale Contracts for Difference are slated for introduction later this year, with allocations planned for 2027. Further administrative guidance and allocation rules are expected ahead of the 2027 process.