Electricity Generator Levy

The Electricity Generator Levy (EGL) was introduced in 2023 and is a temporary tax on windfall revenues for large renewables. The EGL is currently calculated as 45% of a generator’s annual revenue above a benchmark price, which is currently £82.61 per MWh and has been increased in line with CPI since 2024. New investments in renewable energy are not subject to the EGL.

When gas prices are high, renewable generators that are not in receipt of Contracts for Difference receive substantial increases in revenue because they can sell the electricity they generate at higher prices, without having any new costs.

The government has reviewed the design of the EGL in light of the conflict in the Middle East and is announcing today that the 45% EGL rate will increase to 55% and will be extended past its scheduled conclusion in 2028. This will support the government’s objective of reducing the impact of gas prices on businesses and households. Firstly, it will encourage participation at a competitive price in wholesale Contracts for Difference, a new proposal announced today by the Secretary of State for DESNZ, which seeks to weaken the link between high gas prices and high electricity generation prices. Secondly, it will ensure a proportion of any exceptional revenues resulting from the passthrough of high gas prices to electricity generators’ revenues is available to government to support businesses and households with the impacts of the conflict in the Middle East on the cost of living.

The rate increase will take effect from 1 July 2026 to respond to the high prices that generators are benefiting from now because of the crisis in the Middle East.