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Germany Sets Windfall Tax At 90%

November 27, 2022

By Paul Homewood


From Bloomberg:




Germany has set out its plan to claw back 90% of the earnings from some clean power generators as the government seeks funding for its consumer aid package.
The government is planning to skim earnings above €130 a megawatt-hour for solar, wind and nuclear, according to a draft law seen by Bloomberg News. Politicians are trying to reclaim some of the profits that companies like RWE AG are making from high power prices.
The windfall tax will be applied to electricity producers based on the fuel they use. Lignite plants will be taxed on earnings above €82 a megawatt hour and oil plants above €280. The measures will apply for 10 months, backdated to start of September 2022, until end June 2023 and could be extended to end of 2024.
Germany set out a €54 billion package on November 22 that puts a cap on gas prices for companies and households from next year with more earmarked for electricity. The aid for bills will be partly financed by the windfall tax, from which the government expects to raise a double-digit billion-euro amount, according to officials.
The level proposed is lower than the European Commission’s suggested level of €180 a megawatt hour. Renewable generators in Germany have warned that such a levy will deter investment needed to help the nation wean itself off imported fossil fuels.
The more than 200-page-long law proposal, which is supposed to pass cabinet on Friday, has already provoked widespread criticism from energy lobby groups. Andreas Jung, a lawmaker from the oppositional Christian Democrats, said that the levy will “suffocate” renewable energy companies because they have been investing a lot of money in new technology.
The law is scheduled to pass the upper house on December 16 so that it can go into effect on January 1.

Germany it appears is following suit with the UK measures announced last week, although the rates are different.

I do have to laugh though when I hear the renewable lobby complaining that a windfall tax will deter investment. If wind farms cannot make a profit with a price of 130 euros/MWh, then clearly they are not the cheap alternative we have been told.

  1. November 27, 2022 10:01 am

    Every wind farm operator should have to directly provide and pay for out of their own pocket, some form of generation to provide power for when the wind or sun are absent.

    • Harry Passfield permalink
      November 27, 2022 10:26 am

      ..and pay for the grid balancing that their intermittent inputs disrupt.

    • November 27, 2022 11:49 am

      And solar farm owners too.

      Prof Dieter Helm in his 2017 ‘Cost of Energy Review’:

      “The FiTs and other low-carbon CfDs should be gradually phased out, and merged into a unified equivalent firm power (EFP) capacity auction. The costs of intermittency will then rest with those who cause them, and there will be a major incentive for the intermittent generators to contract with and invest in the demand side, storage and back-up plants. The balancing and flexibility of markets should be significantly encouraged.”

      Click to access Cost_of_Energy_Review.pdf

    • Phoenix44 permalink
      November 28, 2022 9:28 am

      Why? The investors are simply making money from stupid government decisions. Why shouldn’t they? This is as nonsensical as the “evil fossil fuel” lot.

  2. GeoffB permalink
    November 27, 2022 10:40 am

    LMAOROFL or schadenfreude for us oldies. This weeks wind forecast for Dogger is low for Monday to Wednesday picking up Thursday, please please can we have power cuts, but wait a minute, the idiots in parliament, are now pushing on shore wind whilst banning fracking, I guess bigger backhanders for wind!

  3. November 27, 2022 10:51 am

    Green communism through the backdoor, the govern mind says how you are allowed to make money, and what you are allowed to earn. Sick.

  4. It doesn't add up... permalink
    November 27, 2022 11:19 am

    I regularly look at the weather maps at ventusky. You can have them display colour coded wind speeds in a choice of units. For wind farms it is convenient to switch to metres per second. You need at least 3m/sec to start generating. Around 10-12m/sec (lower end onshore higher end offshore) the turbines reach nominal capacity, and they cut out above 25m/sec. It soon becomes evident that in most locations on land wind is not going to generate a great deal. Offshore breezes do at least tend to be more reliable, but they too can disappear. Offshore is of ourselves a rather more costly installation, with a more punishing environment from the salty spray.

  5. November 27, 2022 11:23 am

    The renewable industry will lie, lie and lie to get some form of subsidy for its useless generation. Unfortunately most of our politicians are too ignorant to see the impact of the renewable energy scam (or as has been said, backhanders (or blackmail)).

  6. Gamecock permalink
    November 27, 2022 12:02 pm

    Speaking of lies, Phillip, check this:

    ‘the levy will “suffocate” renewable energy companies because they have been investing a lot of money in new technology’

    What is ‘new’ in wind turbines?

    • November 27, 2022 1:30 pm

      Depends on how you view time. First windmills probably appeared in the last 2 or 3 centuries of BC and were in certainly in use by 5th century AD. Of course we could mention the inconvenient truth as to why they went out of use….

  7. It doesn't add up... permalink
    November 27, 2022 12:03 pm

    Presumably the lignite plants don’t have to pay tax on carbon taxes – i.e. they are allowed to deduct carbon tax before being assessed. The price they charge the market will include carbon tax, which is around €80/tCO2e at the moment, which would leave the power stations permanently loss making unless prices go over €500/MWh.

    Diesel generators face a problem if gas oil prices increase. They produce 3-4MWh/tonne of gas oil so as prices rise from the current $900/tonne they would become lossmaking. They have been as high as $1665/tonne. Not sure the Germans really want Dunkelflaute power cuts.

  8. Graeme No.3 permalink
    November 27, 2022 8:37 pm

    Our Victorian brown coal (lignite) electricity generators produce at $40 per MWh (£73) running at capacity, which they do normally as neighbouring States need extra power and it is the cheapest supply.
    So our recently re-elected looney Labor wants to shut them down. To do so they will have to buy the stations back (increasing their already huge State debt) and rely on renewables.

  9. oldereb permalink
    November 27, 2022 11:07 pm

    After the US hires their new 87,000 armed IRS agents, and the income tax rate reaches 95%, we will not need an emergency lockdown to stagnate the economy.

  10. Adam Gallon permalink
    November 28, 2022 6:20 am

    I wonder whether that money will be returned to the consumers who’ve paid this excess money?
    Yes, silly question.

    • dave permalink
      November 28, 2022 8:42 am


      Well, sort of. Winter fuel allowances and other sops. We are like children with a gambling-and-sex addict of a dad, wondering whether we figure anywhere in his plans. Or whether he is even bright enough to have plans.

      The whole point of a sensible capitalist economy is that we, as everyday consumers, do not have to understand the world. The invisible hand guides us all to fairly satisfactory solutions. Or would, if we had such an economy, and if outright thieves and liars and bullies were shunned and ignored.

      • Phoenix44 permalink
        November 28, 2022 9:32 am

        Not so much capitalist as free market. Unfortunately the energy sector is capitalist but not free market. So capitalists make money but from gaming the system rather than having to provide goods and services at prices we are willing to pay.

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