Centrica Shares : Shares in the gas and electric distributor Centrica ( CNA) hit their lowest point this year, plummeting nearly 5 percent to 67.5p during the first trading session, following reports that by the US government that it was planning to set a cap on prices for renewable energy.
Shares of another utility Drax ( DRX) were also lower, and renewables funds fell sharply, as did Next Energy Solar (NESF) falling 11% by midday.
SHOT MOVE
According to an article published in Financial Times, ministers are currently drafting plans for an interim cap on the profits that renewable energy companies earn from the rising wholesale prices for power.
The industry has been warned that the cap needs to be less harsh as the European cap, or the UK could be at risk of an ‘investment exodus’.
In the European Union’s plan the non-gas generators must pay any profits they earn above EUR180 (PS158) for each megawatt hour, to their government.
Companies that have solar and onshore wind farms have made astronomically huge profits from the power they sell to grid, on in addition to the subsidies from the government they already receive.
Businesses that manage offshore wind power farms must adhere to distinct tariff system known as ‘contracts of difference that limit the amount they are able to charge.
SIZABLE INVESTMENT
According to the paper the government’s initial point of departure for discussions on price caps for renewable energy ranged in the range of PS50 to PS60 per megawatt hours, which is significantly lower than what is the European price limit.
Centrica is a well-liked investment for investors in the retail market because of its high dividend yield it is the largest operator of solar and wind power and, as such, could be unable to earn a significant portion of its revenue under the cap that is planned.
The investment in energy supply in across the UK along with Ireland is predicted to be up to PS200 billion by 2021 to 2030. The majority of this will be dedicated to low-carbon, renewable technologies like solar and wind.
