UK Chancellor Jeremy Hunt is reported to be preparing to hit renewable electricity generators with a 40% windfall tax on their "excess returns" as he attempts to fund measures to ease the cost-of-living crisis.
The Guardian says he is considering a levy on the extra profits for these green firms above a certain price per megawatt hour, which has yet to be decided.
Mr Hunt is also planning to toughen the existing windfall tax on North Sea oil and gas operators, raising the levy from 25% to 35% and extending it by three years until 2028.
News of the Government plans are due to be announced in tomorrow's Budget.
The chancellor was warned at the weekend that oil and gas operators could be driven out of investing in British waters if he raises the levy to 35% - giving an overall tax rate of 75%.
Trade body Offshore Energies UK said its members have been shocked by reports of the proposed "supertax".
Highest taxes
Britain's offshore operators were already paying a tax rate of 40% - the highest of any industrial sector - on profits from oil and gas production, before the additional 25% levy was imposed earlier this year.
The two windfall taxes are expected to generate £45billion over six years, depending on movements in energy prices.
Officials are said to have spent more than six months examining methods of taxing green electricity generators, which have enjoyed big profits on the back of soaring power prices - linked to the rising wholesale cost of natural gas - while their costs remained largely stable.
The government has worked on plans to shift companies on a voluntary basis to contracts for difference, which cap their revenues but guarantee them a long-term income.
However, industry sources said renewable power generators have increasingly indicated that a one-off windfall tax would be preferable.
There are fears that a tax on renewable companies could deter investors from backing large-scale green energy projects.
Investment plans
The boss of one of Britain's biggest green energy firms has warned that it will "reconsider" its investment plans if the government imposes a windfall tax that it regards as unfair on renewable power generation.
Keith Anderson, chief executive of ScottishPower, said it accepted the need to pay more tax, but only subject to certain conditions. He said a windfall levy should be applied to the entire power-generation sector, should tax only genuine windfall profits and should provide generous tax breaks for investment in renewables.
Prime Minister Rishi Sunak admitted yesterday that UK's international reputation has taken "a bit of a knock" this year, but he vowed to restore economic stability.
He added that tax rises and spending cuts in the Budget tomorrow were needed to reduce rising inflation and UK public debt.
Critics of his approach fear it could worsen a predicted two-year recession.
But Mr Sunak said decisions would be taken in a "fair" way, and everyone would benefit from reduced debt levels.
Inflation challenge
Speaking to the BBC at the G20 summit in Indonesia, he added reducing inflation was his "number one challenge".
He said it was important to "limit" mortgage repayments for homeowners.
"The best way to do that is to get a grip of our borrowing levels, and have our debt on a sustainable basis falling," added the PM.
The chancellor has warned that everyone will pay more tax under his plans to repair the public finances.
The Budget, the government's second financial package in under two months, comes after mostly now-abandoned tax cuts in the mini-Budget outlined by Liz Truss's Chancellor Kwasi Kwarteng sparked financial turmoil.
The Treasury has not confirmed details, but the BBC has been told Mr Hunt is set to announce spending cuts of about £35billion and plans to raise £20billion in extra taxes.