Cap on Irish electricity revenues 'to protect households'

A new windfall tax on non-gas electricity generators in the Republic of Ireland will help to protect households against rising costs, the Irish government has said.

Excess profits collected by companies beyond a capped amount will be used to support consumers.

The cap on market revenues will be set at €120 (£103) per megawatt-hour (MWh) for wind and solar and at least €180 (£155) per MWh for oil-fired and coal-fired generation.

The cap will be in effect from December until June 2023.

If electricity suppliers can prove they are passing on lower prices on revnues made in excess of the cap, those revenues will not be subject to the cap.

The change was introduced by Minister for the Environment Eamon Ryan at a cabinet meeting on Tuesday.

A temporary solidarity contribution, as set out in the European Council Regulation, will also come into effect.

“This has not been done to raise revenue for the State, for the general Exchequer,” Mr Ryan explained.

“It is to give us a pool of funds that will help us to take further measures when it comes to protecting people from energy costs.”

Mr Ryan said given the volatility of gas prices, the level of proceeds from the cap on market revenues and the temporary solidarity contribution cannot be estimated with any certainty.

Proceeds from the cap on market revenues are expected to be collected in 2023, with proceeds from the temporary solidarity contribution to be collected in 2023 and 2024.

In the UK, the government has extended the windfall tax on oil and gas companies operating in the North Sea.

The levy was introduced in May, but will now carry on for longer at a higher rate.

There had been calls to increase the tax after Shell and BP reported huge profits.

What is a windfall tax?

A windfall tax is a extra levy imposed by a government on a company.

The idea is to target firms which benefit from something they were not responsible for - in other words, a windfall.

Energy firms are getting much more money for their oil and gas than they were last year.

This is because demand increased when Covid restrictions were lifted and the Ukraine war led to concerns about energy supply.