Germany’s windfall tax on electricity companies’ profits ends in June

The collecting of German energy companies’ windfall profits will end on 30 June. "In view of the secure electricity supply, falling electricity prices, and thus a lack of revenue from the levy, and because it cannot be ruled out that it slows investment, an extension of the levy is not justified," the economy ministry (BMWK) said. In response to the energy crisis, the government had introduced the scheme to co-fund support measures for consumers.  The tax on windfall profits will be valid between 1 December 2022 and 30 June 2023, and the economy ministry plans to announce the revenue generated from the levy in August.

Renewable industry associations BSW, BWE and BEE had criticised the levy before its introduction, saying it could scare of investors and slow the rollout of renewables. However, major distortions in the electricity market have not yet been observed, the economy ministry stated in a report to parliament, Tagesspiegel Background reports. Still, “last year's debates about retroactive levies were particularly damaging to [producers’] confidence,” German renewable energy federation (BEE) head Simone Peter told the energy policy newsletter.

In the wake of Russia’s invasion of Ukraine, profit margins of energy companies with low operation costs (mainly renewables) multiplied due to rising energy prices, while many consumers faced difficulties in paying their energy bills. Collecting parts of these unexpected gains had been agreed especially to co-fund the “energy price brakes” that support payments for gas and electricity consumption. Electricity market experts expect that most of the gains made in the past year will not be touched, however, since by the start of the scheme in December 2022 the costs for most energy products had already peaked.