Government moves to curb gas-driven power price shocks; TRIG sees potential benefits

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The UK government has unveiled a broad package of energy reforms aimed at reducing the influence of volatile gas prices on electricity bills, alongside fresh support for clean power, grid investment and electrification. The measures come as renewed geopolitical tensions and disruption in the Middle East have once again exposed the UK’s reliance on international fossil fuel markets.

At the centre of the package are the government’s plans to “break the link” between gas and electricity prices by expanding the use of long-term fixed-price contracts for renewable generators and increasing the windfall tax on electricity producers benefiting from higher wholesale prices.

Fixed-price contracts for existing renewables

The most significant structural change is a proposal to offer voluntary long-term fixed-price contracts to existing low-carbon generators that are not already covered by subsidy schemes such as Contracts for Difference (CfDs). According to the government, these assets account for roughly a third of Britain’s power supply.

The aim is to shield households and businesses from spikes in wholesale electricity prices, which are often set by gas-fired peaking plant, even when cheaper renewables and nuclear supply much of the system.

The government says that Britain has already reduced the frequency with which gas sets the power price from around 90% of the time in the early 2020s to around 60% today, and this should fall further as more renewable capacity is built and comes online.

Windfall tax increased

The government has also announced changes to the Electricity Generator Levy (EGL), which was introduced to capture exceptional revenues earned by generators during periods of elevated gas prices. The tax rate under the levy is increasing from 45% to 55% and with immediate effect and its duration is being extended. The government says that the additional revenues generated by the levy will help fund support for households and businesses facing higher energy costs.

Wider clean energy package

The announcement also included a wider range of measures intended to accelerate the energy transition and reduce bills over time, including:

  • bigger grants for households using heating oil and LPG to install low-carbon heating;
  • extra funding for solar panels on social housing, schools and colleges;
  • plans to unlock public land for renewable development;
  • reforms to planning, grid access and network connections;
  • easier installation of EV chargers, heat pumps and rooftop solar;
  • funding to expand UK heat pump manufacturing; and
  • a new delivery plan for “Reformed National Pricing”, which the government says could unlock up to £20bn of system benefits between 2030 and 2050.

What it means for TRIG

The Renewables Infrastructure Group (TRIG) has released a statement following the government’s announcement saying that several elements of the package could be supportive for its portfolio.

Most notably, the possible extension of CfD-style contracts to operational renewable assets could improve revenue visibility and reduce earnings volatility for existing projects. TRIG said this policy aligns closely with its strategy of increasing fixed-price income, noting that around 75% of its projected revenues over the next five years are already contracted or fixed-price in nature. The company expects its eligible operational assets to participate in the proposed allocation process in 2027, if the scheme proceeds.

TRIG also said the higher Electricity Generator Levy is not expected to affect its Q1 2026 NAV. Its current power price assumptions remain below the threshold at which the levy applies, meaning no impact is expected on asset values or dividend cover.

Meanwhile, policies to accelerate electrification through EV adoption, heat pumps and network upgrades may support longer-term demand for electricity, strengthening the case for renewable generation and battery storage assets such as those held in TRIG’s portfolio.

What it means for ORIT

Octopus Renewables Infrastructure (ORIT) has also published an update in response to the UK government’s energy policy changes. ORIT estimates that the removal of Carbon Price Support from April 2028 would reduce forecast power prices for its unhedged UK assets by around £2–3/MWh initially, fading over time as renewables play a larger role in setting electricity prices, with a hit to net asset value is less than 0.5p per share. The increase in the Electricity Generator Levy from 45% to 55% is not expected to have a material impact on the trust.

More positively, the government’s proposal for voluntary long-term fixed-price contracts for existing low-carbon generators could create an opportunity for ORIT to lock in additional stable revenues in future. That would fit well with the trust’s income-focused strategy and may help further reduce exposure to wholesale power price volatility.

Written By Matthew Read

Head of Production and Senior Research Analyst