Britain set out plans for a temporary revenue limit on low-carbon electricity generators on Tuesday, which the government said had the potential to save billions of pounds for consumers.
The "Cost-Plus-Revenue Limit" forms part of a broader energy support package announced by the country's new Prime Minister Liz Truss last month that included a cap on the price of average household energy bills.
The package, which is called The Energy Prices Bill and gives the government new emergency powers to carry out the proposals, was introduced in parliament earlier in the day.
Gas prices have rocketed across Europe and Britain following Russia's invasion of Ukraine, which have in turn driven up the cost of electricity.
Electricity prices are typically set by gas, so the measure would apply to generators that sell their power at those soaring prices but do not need to buy expensive fuel.
"Low-carbon electricity generators are therefore benefiting from abnormally high prices, while consumers are having to pay significantly more for energy generated from renewables and nuclear, even though they often cost less to produce," the Department for Business, Energy and Industrial Strategy (BEIS) said.
Trade association RenewableUK said it was concerned that the cap will send the wrong signal to investors in renewable energy in Britain.
"A price cap acting as a 100% windfall tax on renewables' revenue above a certain level, while excess oil and gas profits are taxed at 25%, risks skewing investment towards the fossil fuels that have caused this energy crisis," RenewableUK's CEO Dan McGrail said in a statement.
"As such, to limit the negative impacts, it is essential that a cap is set at a level that doesn't make the UK less attractive to investors than the EU (the European Union), is technology neutral, and has a clear sunset clause in place."
Britain's move follows similar efforts in Europe, where the European Commission has proposed setting a price limit of 180 euros per megawatt-hour (MWh) on the revenue these generators get for their power in the market.
No details were given on the expected revenue price limit for the British scheme which would apply to generators in England and Wales.
BEIS said the measures would come into force at the beginning of 2023 and it will launch a consultation with industry before announcing precise details on how its temporary "Cost-Plus Revenue Limit", would work.
(Reuters - Reporting by Susanna Twidale and Muvija M; editing by David Evans)